The Seed Enterprise Investment Scheme (SEIS), which offers tax efficient benefits to individuals whilst encouraging investment in small and early-stage start-up businesses in the UK, has been made a permanent fixture by Chancellor George Osborne at his Budget 2014 speech.
Mr Osborne confirmed that the success of the SEIS program and the promotion of new enterprise and entrepreneurship has resulted in the Government endorsing the implementation of SEIS as a long term option having been originally due to expire on 5th April 2017.
Mark Payton, managing director of Mercia Fund Management, said: “SMEs can breathe a sigh of relief as Osborne backed up his support for them by continuing the coalition’s tax incentives for private investors seeking investment opportunities via EIS and, most importantly, SEIS.
“In addition, the Government has made it clear that such incentives are not provided for low-risk investments which already receive government subsidy.”
The main aspects of the scheme to date are as follows:
SEIS investors can invest £100,000 in a single tax year which can be spread over numerous companies. Individual companies can raise no more than £150,000 through SEIS investment (this is in total and NOT an annual threshold).
SEIS investors qualify for income tax and capital gains tax relief for subscribing in cash for qualifying shares in qualifying UK start-ups. Qualifying shares includes ordinary shares, but also shares that may have certain non-cumulative preferential dividend rights.
Investors can receive up to 50% tax relief in the tax year the investment is made.
Where income tax relief is available for an investment into SEIS shares, broadly any capital gain realised on a disposal of the shares will be exempt from tax.
The company must have assets of less than £200,000 in order to be eligible for investment.
There is a huge amount of anti-avoidance legislation to prevent exploitation for tax avoidance purposes.
Mr Osborne said: “Two years ago, I launched the Seed Enterprise Investment Scheme to help finance start-ups.
“It’s been a great success and I’m making it permanent. We’re also backing investment into social enterprises with a Social Investment Tax Relief at a rate of 30%.”
This new relief brings social enterprises in line with enterprise investment schemes and venture capital trusts, allowing eligible social enterprises to receive a maximum of around £290,000 investment over a three-year period.