Are investors keen to invest in micro businesses in the UK?
Seed Enterprise Investment Scheme (SEIS)
Banks in Britain have drastically reduced their lending to small businesses often restricting their growth. On the other hand, investing in companies can be risky. However, the tax incentives available under certain schemes can often turn a risky venture into a tax efficient opportunity for investors.
So therefore there is a good match!
Here’s SEIS explained better..
UK Business..
The Government introduced the new Seed Enterprise Investment Scheme (SEIS) for shares, issued after 5 April 2012, to encourage investment in small start-up companies. This scheme is attractive to investors by offering generous tax reliefs for qualifying investments. In my recent conversation with Vince Cable the Secretary of State for Business Innovation and Skills he mentioned that this scheme has helped the UK economy and there are strong chances for this to continue.
“The Seed Enterprise Investment Scheme enhances the tax reliefs available for equity investments in smaller companies.”
Tax breaks available under the Seed EIS (SEIS) scheme..
- Up-front income tax relief of 50% for subscriptions of shares by investors (with carry- back facility to the previous tax year).
- No capital gains tax (CGT) on the disposal of scheme shares, which are held for more than three years.
- An exemption from CGT is available for disposals of assets made in 2013/14 (50% of the gain), where the gain is reinvested in SEIS qualifying shares in the same tax year (or treated as so invested using the carry back facility). In order to be eligible for the scheme, the investment, the company and the investors need to meet certain conditions and, as with the Enterprise Investment Scheme (EIS), there are numerous anti-avoidance rules. Investors should therefore take Care before making investments, which they would wish to qualify under the scheme.
Some of the main conditions for the company..
- The company’s qualifying trade must not be more than two years old.
- The same exclusions from ‘qualifying trade’ as for the EIS. e.g. leasing, property development, etc.
- The company must not be under the control of another company (ignoring any ‘on the shelf period’ for shares issued on or after 6 April 2013).
- The company must have a permanent establishment in the UK.
- The company must have fewer than 25 full-time employees at the time of the investment.
- The company must have gross assets of less than £200,000 at the time of the investment.
- The company will be able to raise a total of up to £150,000 under the scheme (total and not an annual limit).
- Once 70% of SEIS funds have been utilised, the company may raise further funds under the enterprise investment scheme or from venture capital trusts.
Some of the main conditions for investors..
- Annual investment limit of £100,000.
- Directors can qualify but employees cannot.
- No substantial interests in the company (broadly interests >30%). The SEIS is a welcome development which enhances the tax reliefs available for equity investments in smaller companies. The main limiting factor from the perspective of the company seeking investment is that the amount it can raise under the scheme is limited to £150,000. A larger limit would have made a more meaningful difference to the funding options for small companies.
If your company qualifies for the SEIS scheme, we can connect you with our partners at Smith and Williamson. Kindly email info@entrevo.com with details of your company such as years in business and the current turn over. For a faster response, please add the subject: “An introduction for SEIS”. If you are looking to invest in companies that qualify under SEIS, please use the subject : “Looking to invest in SEIS”.
Darshana Ubl
CEO | Entrevo UK
www.darshanaubl.com
About Entrevo..
Entrevo Ltd is a training and development company, which has its operations in UK, USA, Singapore and Australia. Its core product is the Key Person of Influence Programme and the Entrepreneur Brand Accelerator events focusing on owner led businesses. Find out more on: www.keypersonofinfluence.com/uk