Introducing the

Seed Enterprise Investment Scheme (SEIS)

 


What is SEIS?

 

The Seed Enterprise Investment Scheme (SEIS) was introduced in April 2012 by HMRC to help small, early-stage companies raise funds through individual investors by providing a series of tax reliefs on investments made into qualifying companies.

Investors may claim relief on up to £100,000 invested through the scheme per annum and can receive reliefs covering 78% of their investment or more. Full details on the reliefs available can be found further below. School for Startups have put together this introductory animation.

 

 

SEIS companies can be invested in directly or through an SEIS fund. Investors looking to invest more than £100,000 may which to learn more about the Enterprise Investment Scheme (EIS) or EIS Funds.

Risk Warning: Tax relief depends on an individual's circumstances and may change in the future. In addition, the availability of tax relief depends on the company invested in maintaining its qualifying status

 


SEIS tax reliefs available

 

The Seed Enterprise Investment Scheme offers a number of tax reliefs to investors ranging from automatic reductions to loss relief and capital gains avoidance. Some of these are dependent on your tax bracket so you'll need to be aware of that.

Additionally, in order to benefit from most of the tax reliefs outlined below and in the examples, investors must hold their shares for a minimum of 3 years.

  • Individual income tax relief of 50% of the amount invested with SEIS

     

    Individual income tax relief of 50% of the amount invested

  • Exemption from Capital Gains Tax

     

    Exemption from Capital Gains on earnings from shares

  • You are also able to receive Capital Gains Relief

     

    Profits realised within 3 years are exempt from Capital Gains if reinvested in SEIS

  • Loss relief in the event that the company fails

     

    Loss relief if the company fails regardless if failure is within the 3 year hold period

Available SEIS Investments

 


SEIS tax relief examples

 

To help you understand potential investment outcomes we have put together three scenarios below. In the first scenario the company goes bust, in the second the company breaks even and in the third the company doubles in value.

 

 

SEIS Tax Relief scenarios

Scenario 1

The company fails

Imagine you invest £1,000 through SyndicateRoom into a Seed Enterprise Investment Scheme eligible company and that the company you have invested in fails.

For this example we will assume a tax rate of 45%.

-£1000
Investment

You've found a great opportunity and decide to invest £1000 to start

+£500
Tax bill

The year you invest you are able to receive 50% of your investment back

+£225
Loss relief

If the company fails you will receive loss relief = 50% investment x your tax rate

-£275

The actual amount of your £1000 investment you will lose if everything goes wrong

 

 

Scenario 2

The company breaks even

Now imagine that you invest £1000 through SyndicateRoom into a Seed Enterprise Investment Scheme eligible company and in a few years' time the company sells on for the same value as when you invested.

-£1000
Investment

You've found a great opportunity and decide to invest £1000 to start

+£500
Tax bill reduction

The year you invest you are able to receive 50% of your investment back

+£500
Profit from sale

The amount you receive for your shares when the company decides to exit

£500 tax free*

* You don't pay Capital Gains Tax on the profits from shares you've held on to for at least 3 years

 

 

Scenario 3

The company doubles in value

Lastly, imagine that you invest £1000 through SyndicateRoom into a Seed Enterprise Investment Scheme eligible company and in a few years' time the company doubles in value.

For this example we will suppose that you owe capital gains at 28% and, as per the other examples, your tax rate is 45%.

-£1000
Investment

You've found a great opportunity and decide to invest £1000 to start

+£500
Tax bill reduction

The year you invest you are able to receive 50% of your investment back

+£2000
Profit from sale

The amount you receive for your shares when the company decides to exit

£1500 tax free*

* You don't pay Capital Gains Tax on the profits from shares you've held on to for at least 3 years


How do I claim SEIS tax relief?

 

First, you should consider only investing in companies that have SEIS advanced assurance. This means the company has already applied for and received confirmation that they can offer SEIS tax incentives to investors. Without advanced assurance there is no guarantee that you will see any tax relief materialise.

Now the complicated part made simple:

  • When the company has been trading for four months, or if it has spent 70% of the total investment, the company must complete and return the SEIS1 form to the SCEC (the Small Companies Enterprise Centre, part of the HMRC).

  • When the SCEC has reviewed the form and confirmed that the company has met the requirements, the SCEC will issue an "SEIS3" claim form to the company which must then be sent to each investor for completion.

  • When an investor receives the SEIS3 form the form is to be completed and submitted as a part of the investors' tax return.

  • Tax relief can be claimed up to five years after the 31 of January for the year in which the investment was made.

 


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