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Kirk Rice Blog

Seed Enterprise Investment Scheme (SEIS)Written on May 10, 2018 by Kirk Rice LLP

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme was introduced by George Osborne in his 2011 Autumn Statement in order to boost economic growth in the UK by promoting new enterprise and entrepreneurship. The scheme has very generous tax incentives to encourage investors to invest in new start up businesses. New businesses are inherently risky, and many will question investing in them even with the generous tax breaks. This is a fair question, but the point is that the tax reliefs significantly reduce your potential loss should the investment fail, which may be acceptable to some investors who have invested in a range of Seed Enterprise investment Scheme start ups.

Seed Enterprise Investment Scheme (SEIS) is available to qualifying individuals who subscribe cash for the issue of qualifying shares in unquoted trading companies with fewer than 25 employees and gross assets of up to £200,000, carrying on or preparing to carry on a new business.

Where the qualifying conditions are met, the investor can get a 50% income tax reduction on the amount of the SEIS share subscription. The maximum annual share subscription is £100,000. It is possible to elect for the subscription to be treated as being made in the previous tax year.

Example

Bob invests £50,000 for 50,000 (tax year 2017–18) SEIS qualifying shares. The maximum SEIS relief available is £25,000 (50% × £50,000). Bob’s tax liability is £30,000 before SEIS relief, which he can reduce to £5,000 (£30,000 – £25,000) as a result of his investment.

If Bob’s tax liability before SEIS relief had instead been £20,000 in 2017–18, he could have reduced his tax liability to zero, but would have lost the rest of the relief available of £5,000. However, if Bob had not made any SEIS investments in the 2016–17 tax year, and had capacity to claim SEIS relief, he could elect for 10,000 of the shares to be treated as issued in the 2016–17 tax year, and reduce his 2016–17 tax liability by £5,000.

 

A gain on a disposal of shares on which SEIS income tax relief has been claimed, may be exempt from capital gains tax if the disposal is made on or after the third anniversary of the date on which the shares were issued.

Any reader interested in discussing Seed Enterprise Investment Scheme can call Viru Patel on 01344 875 000 in our Ascot office or Hadley Baldock on 0208 789 8588 in our Putney office or email info@kirkrice.co.uk. This article was updated and correct on 10/5/2018.

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SEED ENTERPRISE INVESTMENT SCHEME

Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future.

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