The Seed Enterprise Funding Scheme 

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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 buyers.

The motivation comes within the type of earnings tax aid and an exemption from capital features tax (CGT). This in flip boosts financial progress by selling enterprise and entrepreneurship.

In contrast to the Enterprise Funding Scheme (EIS), SEIS is targeted solely on serving to small, younger firms trying to elevate 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 elevate?

Your enterprise can receive as much as £150,000 of funding by way of the SEIS. This can be a cumulative restrict, not an annual restrict, and you need to not have beforehand raised cash below EIS or enterprise capital belief (VCT) schemes.

The cash you elevate have to 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.

Instance 1

Karen invests £120,000 by way of SEIS throughout 2017/18
Karen invests £70,000 by way of SEIS throughout 2018/19

As Karen has not used £30,000 of the £100,000 restrict in 2018/19, she will carry again the excess to the earlier 12 months. Due to this fact, she might receive full earnings 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).

Instance 2

James sells his shares for £200,000 in June 2018, making a revenue (or achieve) of £90,000. Offering James makes qualifying investments of not less than £90,000 in SEIS shares within the the rest of 2018/19 and all different situations are met, the £90,000 achieve can be utterly freed from CGT. Observe that James doesn’t want to take a position the proceeds of £200,000 with the intention to receive full exemption from CGT.

How does SEIS work in your buyers?

Buyers are capable of make investments a most of £100,000 in a single tax 12 months, which may be unfold over plenty of firms. They have to not have a controlling stake in any of the businesses they spend money on.

Buyers can obtain an earnings tax aid price as much as 50% of investments of as much as £100,000 each year, so long as they spend money on an organization which meets these SEIS necessities. If the £100,000 restrict will not be utilised, any surplus could also be carried again to the earlier 12 months.

Shares in an organization have to be held by the investor for a interval of three years, from the date of problem, 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 can be withdrawn or lowered.

In addition to this earnings tax aid, Capital Good points Tax (CGT) exemption can also be out there on features on shares throughout the SEIS programme, giving buyers an additional tax break price as much as 28% of their achieve.

Is my enterprise eligible for SEIS?

In an effort to be eligible for SEIS, there are some pretty strict standards your small business has to fulfill.

Your enterprise should:

• Be based mostly within the UK, and have a everlasting institution within the British Isles
• Have fewer than 25 staff
• Be not more than two years outdated
• Have property of lower than £200,000
• Commerce in an authorized sector, e.g. finance, funding (observe: property companies cannot elevate capital by way of SEIS)

Your organization can use the scheme if it:

• Carries out a brand new qualifying commerce
• Shouldn’t be buying and selling on a recognised inventory change on the time of the funding
• Shouldn’t be desiring to grow to be a quoted firm, or a subsidiary of 1, on the time of the funding
• Doesn’t management every other firm, and has not been managed by one other firm for the reason that date of your organization being integrated

If it does not seem like SEIS is appropriate for your small business, take a look at our part on elevating finance for all the pieces you’ve got ever needed to find out about funding.

How can I elevate SEIS funding?

Earlier than you apply for SEIS, you possibly can contact HMRC to ask in case your funding is prone to qualify.

Generally known as advance assurance, this can be utilized to show to buyers that your proposed funding might meet the mandatory 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 every other enterprise capital (VC) schemes you’ve raised finance from
• The newest draft of your proposal to potential buyers

You’ll find a extra complete breakdown of the data you’ll want to use for SEIS on the Gov.uk web site.