SEIS (Seed Enterprise Investment Scheme)
A new government incentive aims to help UK start-ups and young companies. It starts on 6th April 2012. If you are an Investor, have a look to see if this will be applicable to the businesses into which you are investing. There has been a similar incentive around for some time now (EIS) but the SEIS specifically targets new companies. The details will come out in the Chancellors budget speech next week (21st March 2012), but these are the basic points:
- The business must be new, or 2 years old or less, with fewer than 25 employees. It must have less than £200,000 of gross assets and not quoted on a stock market.
- Directors or executives cannot use the scheme to invest in their own companies.
- You can raise up to £150,000 of funding through the SEIS, but mustn’t have already raised any money under EIS or venture capital trust (VCT) schemes. This is in total not per year.
An Investor can have up to 30% of a share in the business under this scheme. The SEIS makes it attractive for an Investor to fund a start-up because of the number of tax reliefs that they would receive:
1. Investors can claim back income-tax of 50% of the amount invested.
2. An Investor can have a ‘capital gains tax holiday’. Capital gains tax (CGT) can be avoided on any asset sold during the financial year 2012-2013 as long as they reinvest the proceeds in a SEIS eligible start-up in the same year.
3. The combined effect of the CGT holiday and the income tax break gives relief of up to 78% in the first year.
The final details are still to be published but this should whet your appetite. It’s well worth while finding out more about the scheme either to make your new business attractive, or to maximise your investment returns.