Seed (SEIS) Enterprise Investment Scheme

The Seed Enterprise Investment Scheme (SEIS) offers great tax efficient benefits to investors in return for investment in small and early stage start-up businesses in the UK.

The Seed Enterprise Investment Scheme (SEIS) was designed to boost economic growth in the UK by promoting new enterprise and entrepreneurship.

The scheme was introduced in the Chancellor George Osborne’s 2011 Autumn Statement which heralded a big shake up of tax incentives for investors, with the Enterprise Investment Schemes and Venture Capital Trusts also being revamped.

Now the Seed Enterprise Investment Scheme has become one of the most revered government-backed schemes ever created.

The Benefits Of Being An SEIS Investor

  • An investment up to a maximum of £100,000 may be placed by an SEIS investor in a single tax year. This can be spread over a number of projects.
  • SEIS investors may not control the company receiving their capital, nor may they hold more than a 30% stake in the company in which they invest.
  • 50% Tax Relief for current or previous Tax Year (from date of Share Certificate)
  • No Inheritance Tax after 2 years
  • Loss Relief on any monies lost at your current tax rate
  • Monies must remain in the company for 3 years to benefit from the above
  • No Income Tax or Capital Gains on any Profits
  • 50% Capital Gains write off from current Tax Year
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Download our SEIS Document

Income Tax reliefs

Income Tax relief is available to individuals who subscribe for qualifying shares in a company which meets the SEIS requirements, and who have UK tax liability against which to set the relief. Investors don’t need to be UK resident.

Example: Jenny invests £20,000 in SEIS shares in the 2012 to 2013 tax year in SEIS. The relief available is £10,000 (£20,000 at 50%). The amount owed for the year (before relief) is £15,000 which she can reduce to £5,000 as a result of her investment.
Example: James invests £20,000 in the 2012 to 2013 tax year in shares. The relief available is £10,000 (£20,000 at 50%). The tax owed for the year (before relief) is £7,500. James can reduce his tax bill to zero as a result of his SEIS investment, but loses the rest of the relief available.

Capital Gains Tax: reinvestment relief

There are 2 Capital Gains Tax reliefs within the SEIS:

  • Reinvestment relief, where a gain arising in tax year 2014 to 2015 on a disposal of any asset is reinvested in shares in a company on which you get SEIS Income Tax relief
  • Disposal relief, where shares in a SEIS company are disposed of after having been held for 3 years and certain criteria are met

What is reinvestment relief

Capital Gains Tax is usually paid after you dispose of an asset. The tax is normally paid for the tax year that the asset is disposed of. Through Re-investment relief, you are able to treat 50% of a gain that arises in tax year 2014 to 2015 as exempt from capital gains share providing you acquire SEIS shares.

Reinvestment relief can be claimed as well as SEIS Income Tax relief on an acquisition of shares. If however, you do not SEIS Income Tax relief, then that will also mean that you cannot get reinvestment relief.  To qualify and receive reinvestment relief ou must invest in SEIS shares an amount at least equal to the chargeable gain.

You cannot claim more than the 50% of the amount on which you receive SEIS Income Tax relief for the tax year 2014 to 2015. You may claim less than the maximum reinvestment relief available to you, for example, if you want to make full use of your annual exempt amount.
Example: You have a gain of £15,000 on a disposal in tax year 2014 to 2015. You subscribe £14,000 for 10,000 SEIS shares issued to you in the same tax year and get full SEIS Income Tax relief. The annual exempt amount for the tax year is £10,900. You can claim reinvestment relief on £7,000 of the gain of £15,000 or on any smaller amount, for example £4,100, leaving £10,900 to be covered by your annual exempt amount.