Quick guide to Seed Enterprise Investment Schemes
Last updated on May 13th, 2022 at 8:14 am
THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2021/22.
Seed Enterprise Investment Schemes offer some of the best tax breaks in the UK.
Investors can put money in to start-up companies destined to encourage entrepreneurs to set up the next Facebook, Google or eBay but SEIS investments are not for everyone – potential for high returns = high risk.
For investors who want to know more about SEIS, here are some key questions answered:
How much is a typical SEIS investment?
The maximum any one investor can pay into a SEIS in a single tax year is £100,000 this can be spread across a number of companies.
How do the SEIS tax breaks work?
• Income tax – Every tax payer qualifies for the 50% reduction in income tax regardless of the rate they pay income tax. Income tax relief can be carried back to the previous tax year. Dividends are taxable.
• Capital gains tax – Shares held for at least 3 years may pay no CGT on disposal. If you reinvest gains from other non-SEIS investments you will receive 50% CGT relief on the original investment. Capital losses can be claimed.
• Inheritance tax – no IHT will be due on the value of the shares if they have been held for at least 2 years.
For companies who want to know more about SEIS, here are some key points:
The maximum a company can receive is £150,000 through SEIS investments.
Employees cannot invest in their company under SEIS (except for paid directors)
A company will be eligible for SEIS investment providing they are a genuine start-up business and meet the qualifying criteria, which includes:
- Incorporated no more than two years ago
- Having 25 or less employees
- Having gross assets of less than £200,000
- Be unquoted at the time of the issue of the shares
- The company must meet the new qualifying trade rules
SEIS investments may be tested in the CII R02 exam. For details of the resources Brand Financial Training can provide to help you pass your exams first time go to: