A tax relief scheme, aimed at encouraging angel investors to put their financial faith in UK start-ups, has resulted in £82 million being invested over the last 18 months, according to new figures released by the Treasury.
The Seed Enterprise Investment Scheme (SEIS) is regarded as one of the most generous tax relief schemes for fledgling businesses in the world and its popularity has greatly accelerated following a sluggish start last year.
Just 378 businesses applied for “advance assurance” through HM Revenue and Customs (HMRC) to ensure they would qualify for the scheme in the first six months of its existence.
However, a total of 1,100 companies have now completed the process and together raised £82 million through the SEIS tax relief. The Treasury has said, on average, £1.3 million of SEIS funding is now being raised by 19 companies every single week.
SEIS works by offering investors income tax relief of 50 per cent, with no capital gains tax on any profit from start-up investments of up to £150,000. During the 2012-13 tax year, investors can reclaim the full amount of tax paid if they reinvest that money into another SEIS-backed start-up venture.
How does a company qualify for SEIS?
To enable a start-up investor to continue to claim and keep SEIS tax reliefs relating to their shares in the business, the company which issues the shares must meet a number of requirements to qualify for investment.
Some of these apply only at the time the relevant shares are issued, while others must be met continuously, either for the entire period from date of incorporation to the third anniversary of the date of issue of the shares, or, in some cases, from the date of issue of the shares to the third anniversary of their issue.
If a company ceases to meet one or more of those conditions, investors may have their tax relief withdrawn.
Visit HMRC’s guide to the Seed Enterprise Investment Scheme today and see if your new business meets the criteria.