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 ...
Startups can find it challenging to raise money, but EIS and SEIS can help!
The Government's Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) both offer great benefits to startups and growing SMEs as well as private investors.
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
they 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.
"So, who is eligible for EIS and SEIS?"
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.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about EIS and SEIS, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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