Even though we've just been through a major pandemic, and the economy seems to be in a bit of a state, now is still a great time to set up a new company in the UK ...
EIS and SEIS are designed to help boost innovative businesses with significant tax breaks for investors should they invest under either scheme. Companies can raise venture capital more easily and investors can claim back significant amounts of Income Tax.
EIS and SEIS both work by giving eligible companies the ability to attract investment that gives plenty of tax relief to investors. EIS helps SMEs grow, and SEIS is aimed at startups.
Under EIS:
- investors get 30 per cent Income Tax relief
- they pay no Capital Gains Tax on any profits they make from the investment
- if they make a loss, they can offset this against their Income Tax
- shares bought through EIS attract no Inheritance Tax
Under SEIS:
- investors get 50 per cent income tax relief
- hey pay no Capital Gains Tax on any profits they make from the investment
- they can offset losses against their Income Tax
- they can claim extra Capital Gains Reinvestment Relief of 50 per cent on tax paid on other investments if they reinvest this in a SEIS company
- SEIS shares attract no Inheritance Tax
Investors can put in a maximum of £1 million a year under EIS and generally, they must hold onto shares for a minimum of three years to be eligible for EIS tax relief. With SEIS, it's £100,000 per year.
With a maximum of £12 million raised during the lifetime of an EIS scheme and £150,000 for SEIS. If any de minimis state aid is provided to the company in the past three years, it may not qualify for the full amount under each scheme.
EIS companies must have been trading for under seven years and have fewer than 250 employees and less than £15 million in gross assets. EIS-eligible companies in the knowledge, research, development or innovation spaces, these upper limits are higher. SEIS companies have been trading for under two years and have fewer than 25 employees. They must have no more than £200,000 in gross assets.
The shares issued under these schemes must be ordinary shares with no preferential rights and any money raised must be spent on qualifying business activities.
Startups can find it challenging to raise money, but EIS and SEIS can help.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.