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(S)EIS2023-10-10T12:09:09+01:00

(S)EIS

The EIS and SEIS venture capital schemes can provide the key to unlocking investor opportunities and growing your business. 

What is EIS & SEIS?

The EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) are one of four of the UK’s venture capital schemes that are intended to incentivise investors into making investments into more risky, early-stage businesses established in the UK. They do this by providing tax reliefs such as income tax relief (either 30% or 50%) to investors who invest in qualifying businesses, making it much easier for those businesses to raise funds.

What are the key differences?

For Companies Raising EIS SEIS
Maximum amount that can be raised: £12m (or £20m if classed as a KIC) £250k
Maximum amount that can be raised in a year: £5m (or £10m if classed as a KIC) N/A – £250k
Maximum gross assets at time of investment: £15m £350k
Maximum full-time staff: 250 (or 500 if classed as a KIC) 25
Trading period limit (from first commercial sale): 7 years (or 10 years if classed as a KIC) 3 years
Investment must be spent within: 2 years 3 years
For Investors: EIS SEIS
Income Tax Relief 30% 50%

This simply provides the headlines and there are many other rules covering qualifying trades, excluded activities, control, subsidiaries and more. To discuss your eligibility, please get in touch. For more on the investor tax reliefs and limits, click here.

How can we help?

The EIS and SEIS schemes allow companies to apply for ‘advance assurance’ from HMRC before raising funds. This effectively provides reassurance to investors that, based on the information provided to HMRC, the company’s upcoming share issue would qualify for EIS/SEIS relief. It’s commonplace for investors to want advance assurance before making an investment.

Following on from the investment, there’s then the task of issuing the shares but also submitting the official EIS/SEIS application to HMRC. This application will be required regardless of whether the advance assurance is submitted. HMRC will then confirm the EIS/SEIS relief providing that all the conditions are met and the business can then provide the EIS/SEIS certificates to investors, which enables them to claim the tax relief.

At UHY (East), we can help with all of these tasks and support you throughout this fundraise starting with establishing your eligibility. Our Tech & High Growth department regularly works with businesses that go through fundraising rounds, so we can be on hand not just to support with the EIS/SEIS, but also all the other advice and tasks such as financial modelling that you may require.

Our Blog and Resources

EIS/SEIS FAQ’s

In short, yes but there are rules to be aware of, including that SEIS must be raised prior to EIS and the raises cannot take place on the same day.

In addition to the income tax relief, there are also other reliefs and limits to note for investors. As at the 2022/23 tax year, the headlines are:

EIS SEIS
Income Tax Relief up to: 30% 50%
Annual Investment Limit: £1m (or £2m if investments above the £1m are made into Knowledge Intensive Companies) £200k
Tax-Free Gains Criteria Providing shares have been held for at least 3 years Providing shares have been held for at least 3 years
Capital Gains Deferral Relief but investors get an exemption up to 50% of the gains when they are reinvested
Loss Relief:
Inheritance Tax Relief:

Unlike with the VCT schemes, there is no tax relief on dividends. If you’re an investor that needs support with tax advice and your tax return, please get in touch.

In this new set-up, the trust holds the shares on behalf of the employees, who become indirect owners of the company. The employees may receive financial benefits, such as bonuses and a profit share, based on the performance of the company.

Yes, our expert tax team can provide a range of support for investors ranging from tax planning advice and personal tax returns.

We write about this topic in our blog on Advance Subscription Agreements here.

In addition to the time limit on spending EIS and SEIS investment, which is 2 and 3 years, respectively, the investment also needs to be spent on qualifying business activity. HMRC have full guidance on this linked here.

Many assume that they can open a new company to get around the trading limit, but you should note that HMRC has a new qualifying trade rule that effectively stops applicants from starting a new company within 2 years that carries out the same trade/business purpose to the previous one. If you are starting a new company with a trade that may seem similar, this should be addressed within the advance assurance so it’s made clear that the trades are different. Sometimes, setting up a new company may not be required if the business satisfies Condition (B) in the S. 175A Income Tax Act. However, bespoke and professional advice should be sought on this, so get in touch to discuss further.

Specifically for EIS tax relief, the trading limit extends from 7 years to 10 years if you are what HMRC classes as a Knowledge Intensive Company (KIC). The criteria of which can be found here.

Yes, these shares need to be ordinary, non-redeemable shares that also have no preferential rights attached.

The Next Steps

If you would like further information on EIS & SEIS and to discuss how we can support, please get in touch and one of our specialists will be happy to talk to you.

Please call us on 0845 606 9632, email us at team@thesmartaccountants.co.uk or complete the contact form below.