Entrepreneurs want to see a revamp of the Seed Enterprise Investment Scheme (SEIS) to make funding for start-up businesses more accessible.
E2Exchange, an entrepreneur’s network, has drafted a manifesto calling for a number of changes to SEIS.
They want to see support focussed on small businesses by:
- Setting up a specialist unit in the Department of Business, innovation and Skills (BIS)
- SEIS funding widened to include more business sectors
- Changes in share classes to make investments more flexible
- A rise in the maximum initial SEIS investment from £100,000 to £150,000
The entrepreneurs are also lobbying in more relaxed national insurance rules for small businesses to encourage job creation.
SEIS manifesto
CEO Shalini Khemka said: “This government has developed a lot of measures to support start-ups and small business, but we believe more could still be done to help these entrepreneurs.
“Our manifesto better balances the tax and practical advantages of SEIS while also helping them with the costs of national insurance and business rates. Addressing these points would help more small businesses prosper and bring economic growth on even faster.”
The manifesto has already been introduced to the House of Lords and E2Exchange hopes to lobby MPs and ministers in the lead up to the next general election in May 2015.
SEIS was the brainchild of Chancellor George Osborne and introduced in his Budget 2013 as a measure for cash-starved entrepreneurs to link up with investors to develop business ideas.
The idea has taken off – with more than 1,000 companies already operating under SEIS.
SEIS allows entrepreneurs to give away shares in their business in return for investments of up to £100,000 in the first year and another £50,000 in the following two tax years.
SEIS for investors
In return for their cash, investors pick up generous tax breaks, including:
- A pound for pound income tax reduction valued at up to £50,000, depending on how much they invest
- A 50% capital gains tax exemption if other assets are sold to raise cash for the SEIS investment
- No capital gains tax charged on the sale of SEIS shares
- Loss relief on the initial investment should the SEIS company fail
Giving away an equity stake rather than borrowing eases cash flow on loan repayments out of working capital for a SEIS company while entrepreneurs develop new ideas that are not yet bringing in money.
