Funding
A Guide to SEIS & EIS For Startups: How To Make Your Startup Investible

There are a number of UK government venture capital schemes to support SMEs.  The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) were introduced to make investment in UK- businesses attractive and to encourage innovation. The schemes offer generous tax relief to investors and have essentially the same purpose – for startups and young UK companies to raise growth funding.

The funds raised under the schemes must be used for a qualifying business activity and solely to advance the growth and development of the company.

SEIS v EIS

The incentive of SEIS/EIS for investors is the tax relief opportunities. Although the schemes have similarities, there are important differences.

SEIS

SEIS is aimed specifically at startups and very early-stage companies, allowing individual investment of up to £100,000 per tax year.

SEIS funding criteria for companies:

  • Fewer than 25 employees
  • Trading for less than 2 years
  • Gross assets valued at no more than £200,000
  • No previous investment from Venture Capital Trust or under EIS

There are also substantial tax benefits to investors:

  • Initial Income Tax relief of 50% against the amount invested
  • No Capital Gains Tax on any SEIS gains after 3 years
  • CGT write-off 50% of the investment in same tax year
  • No Inheritance Tax on shares held for at least 2 years – if shares are sold at a loss the investor can offset the loss against CGT

EIS focuses on small to medium sized companies and allows for an investment of £5m each year and a maximum lifetime investment of £12m or £20m for “Knowledge Intensive” companies, which also includes amounts raised from venture capital schemes.

EIS funding criteria for companies:

  • Fewer than 250 employees or 500 employees for “Knowledge Intensive” companies
  • Trading for less than 7 years or less than 10 years for “Knowledge Intensive” companies
  • Gross assets valued at no more than 15m

Tax benefits to investors:

  • Initial Income Tax relief of 30% against the amount invested
  • No Capital Gains Tax to pay on EIS gains after 3 years
  • Up to 100% deferral of investment amount against CGT
  • No Inheritance Tax on shares held for at least 2 years – if shares are sold at a loss the investor can offset the loss against CGT

If you want to learn more about SEIS & EIS schemes then please contact our team on 020 7193 8798 or email us at: hello@accountspro.co.uk. Alternatively, you can send us a message via our contact page:- https://accountspro.co.uk/contact-us/

 

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