Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
Investing in early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. 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. Past performance is not a reliable indicator of future performance. You should not rely on any past performance as a guarantee of future investment performance.
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What exactly is an SEIS fund?
Tell me about...
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<p class="text-sm font-semibold text-gray-800 uppercase tracking-wide">WHAT IS AN SEIS FUND?</p>
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<p class="text-sm font-semibold text-gray-800 uppercase tracking-wide">ALTERNATIVES TO SEIS FUNDS</p>
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What is an SEIS fund?
An SEIS fund is a managed investment vehicle that raises cash from individuals for the purpose of investing in a portfolio of SEIS-eligible ventures with the hopes of returning a profit to all those who have invested in the fund. SEIS is short for Seed Enterprise Investment Scheme, a scheme run by the HMRC that offers significant tax reliefs for those who invest in either an SEIS fund or SEIS-eligible ventures directly.
What tax reliefs can I expect?
Beyond the generous tax reliefs that are offered through the Seed Enterprise Investment Scheme (outlined below), SEIS funds spread the risk of [investing in early-stage companies](/invest-in-startups) by investing in a large portfolio of these ventures. Further, as SEIS funds are managed by individuals who tend to have experience in the space, they may be able to perform a higher level of due diligence on the companies seeking investment than you might do on your own.
The main tax reliefs afforded through the SEIS are:
Individual Income Tax relief of 50% on up to £100,000 invested
No Capital Gains on the sale of shares held for at least three years
Loss relief (your at-risk investment multiplied by your tax rate)
A few points to consider
The SEIS is only available for companies that have been trading for less than two years, have fewer than 25 employees and have no more than £200,000 worth of assets. By their nature, these are very high-risk investments – hence the tax reliefs on offer. The following are useful points to think about when considering an investment.
How much will you be paying in fees?
SEIS funds can charge significant fees and, since they are a relatively recent creation, there is insufficient evidence to indicate what level of returns, if any, they may generate for investors.
Are you prepared to wait five+ years for a return?
SEIS funds are generally an illiquid investment: once you’ve invested, you will be unable to get cash out easily and are unlikely to see any form of return for at least three years (the minimum time you must keep your shares to retain the tax reliefs). Realistically, you are unlikely to see returns for five or more years.
Use the table below to compare a selection of SEIS funds that are currently open for investment.
Putting money into an Individual Savings Account (ISA) can give you favourable tax arrangements on up to £15,000 invested per year. ISAs come in two major forms, Cash ISAs and Stocks and Shares ISAs. ISAs are exempt from Income Tax and Capital Gains Tax.
Venture Capital Trusts (VCTs)
Venture Capital Trusts, commonly referred to as VCTs, are similar to SEIS funds in that they were designed to allow you to spread your investment across a range of small higher-risk trading companies whose shares and securities are not listed on a recognised stock exchange.
P2P loans
Cutting out the banks and many other intermediaries, <a href="/alternative-investments/peer-to-peer-lending" class="newLink">peer-to-peer loans</a> – or P2P loans for short – allow you to lend money to individuals or businesses through online matchmaking services. In terms of potential returns, P2P loans are significantly riskier than savings accounts and as such can offer lenders higher returns (potentially 4%, 10% or more).
Investing directly in SEIS opportunities
Of course, if you''re looking looking to invest in SEIS-eligible opportunities, you can always take matters into your own hands and handpick your own individual investments through a platform such as SyndicateRoom.
The drawback of this method is that it leaves all the due diligence to you, meaning that you will need to spend time researching your options and deciding how much to invest. While time-consuming, this can be an immensely exciting and rewarding process, particularly if the company you invest in goes on to be the next unicorn.
Disclaimer
The information on this page does not constitute financial advice and is provided on an information basis only, based on research using the following sources:
