This scheme is designed to help your company raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy shares in your company.
Like SEIS, this scheme helps your company raise funds by offering tax reliefs to individual investors. It is designed to help you grow your business.
With both schemes, there are rules that must be followed so that your investors can claim and keep the tax reliefs relating to their shares.
The shares issued must meet the same requirements under both schemes. They must be paid up in full, in cash, on issue and must be full risk ordinary shares which
- are not redeemable
- carry no special rights to your assets
This applies to both schemes. HM Revenue and Customs (HMRC) need an explanation of how the investment in your company meets the condition, which means:
- your company must use the funds raised for growth and development
- the investment should carry the risk that the investor will lose more capital than they are likely to gain as a net return
How the schemes work
- you can receive a maximum of £150,000
- this maximum will include any other de minimis state aid received in the 3 years up to and including the date of the investment, and
- counts towards any limits for later investments through other schemes
- you can raise up to £5m each year, and a maximum of £12m in your company’s lifetime, including amounts raised under other schemes
- your company must receive investment under the scheme within 7 years of its first commercial sale
- special rules apply to knowledge-intensive companies that extend time and investment limits
Tax reliefs will be withheld, or withdrawn, from your investors if you do not follow the rules for at least 3 years after the investment is made.
You can ask HMRC if your share issue is likely to qualify before you go ahead. We can help you with this process. The wording of the risk-to-capital condition narrative is particularly important and we have a track record of getting this right.
When you’ve issued your shares, you must complete a compliance statement. Again, we can help you with this process.