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Quick guide to Seed Enterprise Investment Schemes

Quick guide to Seed Enterprise Investment Schemes

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 – as always, high risk generates high returns.

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.

An investor can only hold up to 30% of the company’s shares.

Employees and directors cannot invest in their company under SEIS

Does my company qualify for SEIS investment?

Yes. Providing you 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 a permanent UK base

– Having gross assets of less than £200,000

–  The company must carry out a new qualifying trade

– The company does not control another company unless that company is a qualifying subsidiary and has not been controlled by another company since the date of the company being incorporated

–  The company has received no Enterprise Investment Scheme (EIS) or Venture Capital Trust (VCT) funds.

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:

https://brandft.co.uk/cii-r02-ro2-investment-principles-and-risk/