The Seed Enterprise Investment Scheme (SEIS) was introduced by the Coalition Government to the UK’s budding entrepreneurs and investors in April 2012.
In just over two years the scheme has helped to raise over £82 million for the UK’s youngest start-ups, with more than 1,000 companies securing financing through the SEIS. These official Government statistics are from 2013, but this year promises to add a substantial amount to that total, as some extremely high profile investments have taken place.
What is SEIS?
SEIS is an incentive-based scheme which encourages investors to place funds into new businesses in return for generous tax breaks. These start-ups are an integral cog in the machinery of the British economy as it slowly clicks back into gear, yet many are forced into bankruptcy within the first 18 months due to a lack of access to funds.
It is widely acknowledged that start-up investment represents an investment at the high end of the risk scale, but by offering significant tax relief, the scheme alleviates the majority of the risk which would usually scare many investors.
The Benefits for Investors
As an investor, the incentives are huge. The most attractive to the majority will be the 45% income tax relief. This percentage relates to the amount invested, so if an investor places £100,000 into an attractive opportunity, £45,000 comes off the next tax bill.
Capital Gains Tax exemption is at 100% after three years have gone by, while there is also Inheritance Tax exemption after two years, and loss relief to guard against the possibility of the business failing.
For the complete overview of the SEIS please go to www.seis.co.uk and download the SEIS Guide
The Benefits for Entrepreneurs
The difficult nature of finding investment to help a business grow is enough to make many want to throw the towel in completely. Banks aren’t lending, and finding private investment is like searching for a needle in a haystack.
Thanks to the SEIS and its association with the crowdfunding platform movement which is currently taking the country by storm, some young businesses have attracted over £1 million in just the first round of funding through SEIS offered to a group of investors through a platform. If the business shows potential, there is no reason why funding can’t be found.
To qualify, the business must have been in existence for less than two years, have fewer than 25 employees, have total assets no greater than £200,000, and have an HQ based in the UK.
An entrepreneur can make their business more attractive to investors by gaining the coveted Advanced Assurance from HMRC, this rubber stamps the business as qualifying for the scheme, and many platforms will not add a business to their portfolio without this important certification.
For the complete overview of the SEIS please go to www.seis.co.uk and download the SEIS Guide
