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What’s a Seed Enterprise Funding Scheme (SEIS)?
Launched by the federal government again in April 2012, the SEIS funding scheme is designed to incentivise funding in early-stage firms by providing tax environment friendly advantages to traders.
The motivation comes within the type of revenue tax aid and an exemption from capital positive aspects tax (CGT). This in flip boosts financial development by selling enterprise and entrepreneurship.
Not like the Enterprise Funding Scheme (EIS), SEIS is targeted solely on serving to small, younger firms seeking to increase fairness finance.
How do SEIS schemes work?
Launched in former Chancellor George Osborne’s 2011 Autumn Assertion, SEIS is designed to assist early-stage companies once they’re simply beginning to commerce.
What quantity of finance can SEIS increase?
Your enterprise can get hold of as much as £150,000 of funding via the SEIS. This can be a cumulative restrict, not an annual restrict, and you have to not have beforehand raised cash below EIS or enterprise capital belief (VCT) schemes.
The cash you increase should be spent inside three years on both:
- A qualifying commerce
- Preparation to hold out a qualifying commerce
- Analysis and improvement that you just anticipate to result in a qualifying commerce
You aren’t allowed to make use of the funding to purchase shares, until they’re in a qualifying 90% subsidiary that makes use of the cash for a qualifying enterprise exercise.
Karen invests £120,000 through SEIS throughout 2017/18
Karen invests £70,000 through SEIS throughout 2018/19
As Karen has not used £30,000 of the £100,000 restrict in 2018/19, she will be able to carry again the excess to the earlier 12 months. Due to this fact, she might get hold of full revenue tax aid for each years. This implies she’s going to get a tax deduction of as much as £95,000 over the 2 years, calculated by being 50% x (£120,000 + £70,000).
James sells his shares for £200,000 in June 2018, making a revenue (or achieve) of £90,000. Offering James makes qualifying investments of at the very least £90,000 in SEIS shares within the the rest of 2018/19 and all different situations are met, the £90,000 achieve shall be fully freed from CGT. Observe that James doesn’t want to take a position the proceeds of £200,000 with the intention to get hold of full exemption from CGT.
How does SEIS work in your traders?
Buyers are in a position to make investments a most of £100,000 in a single tax 12 months, which might be unfold over various firms. They need to not have a controlling stake in any of the businesses they put money into.
Buyers can obtain an revenue tax aid price as much as 50% of investments of as much as £100,000 every year, so long as they put money into an organization which meets these SEIS necessities. If the £100,000 restrict shouldn’t be utilised, any surplus could also be carried again to the earlier 12 months.
Shares in an organization should be held by the investor for a interval of three years, from the date of difficulty, for the tax aid to be retained. If the investor is disposed of inside that three 12 months interval, or if any of the qualifying situations stop to be met throughout that interval, aid shall be withdrawn or lowered.
In addition to this revenue tax aid, Capital Good points Tax (CGT) exemption can be out there on positive aspects on shares throughout the SEIS programme, giving traders an extra tax break price as much as 28% of their achieve.
Is my enterprise eligible for SEIS?
With a view to be eligible for SEIS, there are some pretty strict standards your enterprise has to satisfy.
Your enterprise should:
- Be primarily based within the UK, and have a everlasting institution within the British Isles
- Have fewer than 25 workers
- Be not more than two years previous
- Have property of lower than £200,000
- Commerce in an permitted sector, e.g. finance, funding (be aware: property companies cannot increase capital via SEIS)
Your organization can use the scheme if it:
- Carries out a brand new qualifying commerce
- Isn’t buying and selling on a recognised inventory alternate on the time of the funding
- Isn’t desiring to grow to be a quoted firm, or a subsidiary of 1, on the time of the funding
- Doesn’t management some other firm, and has not been managed by one other firm because the date of your organization being included
If it would not appear to be SEIS is appropriate for your enterprise, take a look at our part on elevating finance for every part you have ever wished to find out about funding.
How can I increase SEIS funding?
Earlier than you apply for SEIS, you’ll be able to contact HMRC to ask in case your funding is more likely to qualify.
Often known as advance assurance, this can be utilized to show to traders that your proposed funding might meet the required situations for the scheme.
Whether or not you get advance assurance or not, you’ll want the next with the intention to apply for SEIS:
- The quantity you plan to boost
- Your marketing strategy and monetary forecasts
- Newest accounts
- Particulars of all buying and selling and the way a lot you anticipate to spend on every exercise
- Particulars of some other enterprise capital (VC) schemes you’ve raised finance from
- The newest draft of your proposal to potential traders
You could find a extra complete breakdown of the data you’ll want to use for SEIS on the Gov.uk web site.
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