Raising Funds Under The Enterprise Investment Scheme

EIS or Seed EIS? Would you qualify?

POSTED BY HELEN BEAUMONT ON 23/06/2017 @ 8:00AM

Are you thinking of setting up in business, or have you just set one up? Do you want to raise finance? If so, have you considered raising those funds under the Enterprise Investment Scheme (EIS)?

If you're looking to raise funds, have you considered the Enterprise Investment Scheme?

Tax relief is available under the Enterprise Investment Scheme (EIS) and Seed EIS to investors in high-risk start-up trading companies. This can provide investors with, amongst other things, Income Tax relief of up to 50% of their investment!

"This could make the difference between someone investing and not investing in your businesses!"

As with everything, there are difficult qualifying conditions that mean not all trades will qualify, and where a business does qualify they need to satisfy those conditions for a period of 3 years after the investment.

HMRC will give advance assurance to companies that request it, about whether they do satisfy the requirements for EIS and/or SEIS. This gives investors confidence before they invest that these reliefs are available. So what are the reliefs?

SEIS:

50% Income Tax relief on investments up to £100,000 in a tax year
100% Inheritance Tax relief provided the shares have been held for 2 years
50% Capital Gains Tax re investment relief on gains made in the current or prior tax year
Tax free growth
Loss relief available against Income Tax

EIS:

30% Income Tax relief on investments up to £1,000,000 in a tax year
100% Inheritance Tax relief provided the shares have been held for 2 years
Capital Gains Tax deferral relief for the life of the investment
Tax free growth
Loss relief available against Income Tax

The shares must be held for at least 3 years, and if during that period one of the following events occurs, some or all of the relief may be clawed back:

The company fails to qualify
The individual sells or gifts the shares
The individual receives value from the company

Trades that are excluded include property developers, accountants, financial advisors and those in receipt of royalties.

However, many types of business do qualify, and so far I have advised and helped restaurant operators, software developers, a provider of gym and fitness services and technology and engineering based businesses to obtain advance assurance from HMRC on their EIS status.

Remember that the above is a very brief overview of what are complex qualifying conditions and professional advice should always be sought.

"Would you like to know more?"

If you're interested in raising funds for your business and would like to talk about the Enterprise Investment Scheme (or seed EIS) then do call me on 01908 774323 or click here to send an email enquiry and let's see how I can help you.

Until next time ...

HELEN BEAUMONT