Some of the rules for Seed Enterprise Investment Schemes (SEIS) have been tweaked in Budget 2015 by Chancellor George Osborne.
He had to update some of the rules to comply with the latest state-aid rules laid down by the European Union to avoid claims from other nations that he was giving disguised government financial help to businesses.
The new rules posted under paragraph 1.199 of the Budget Red Book not only affect SEIS, but the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) as well, writes Stuart Smith of web site SEIS.co.uk.
The changes
Explaining the changes:
- SEIS companies moving up to look for EIS or VCT investors must have been incorporated with 12 years of entering the schemes
- Funding limits for VCTs will have a £15 million cap for general investments but a £20 million threshold for knowledge companies
- More knowledge companies can seek VCT finance as the restriction on the number of employees they must have is lifted from 249 to 499 workers
- The SEIS rule calling for companies to have spent 70% of any SEIS capital raised before entering into an EIS or VCT is removed
- No announcement was included in Budget 2015 about capital gains tax reliefs for investors disposing of assets to raise cash for a SEIS investment – this relief is renewed each year and is due to end on April 5, 2015
“The Chancellor was not at all clear about some of these measures in his speech of documents published for the budget,” said Stuart Smith.
Social VCTs
“Many fund managers are unsure whether the new VCT limit includes the current £5 million investment cap or is in addition to the amount.
“We are also expecting an announcement about CGT relief for SEIS, which is an important tax break for startup investors and one of the main attractions for putting money into the scheme.”
The Chancellor also confirmed plans for Social VCTs to fund community projects as part of his Budget 2015 speech.
“Social VCT investment tax relief will be 30%, while dividends are exempt from income tax and capital gains tax on disposal of shares,” said Stuart Smith.
“One point to be aware of is that community energy generation projects are allows in Social VCTs. These were excluded from SEIS and EIS in the Autumn Statement.”
Full details of how Social VCTs will work will follow in the Finance Bill 2015.
