The Seed Enterprise Investment Scheme (SEIS)
Back high-growth companies with tax-efficient benefits.
SEIS Explained
The Seed Enterprise Investment Scheme (SEIS) offers tax-efficient benefits to investors in return for investment in small and early-stage start-up businesses in the UK.
SEIS was designed to boost economic growth in the UK by promoting new enterprise and entrepreneurship.
The scheme was introduced in Chancellor George Osborne’s 2011 Autumn Statement (and came into force in April 2012), which heralded a shake-up of tax incentives for investors, with the Enterprise Investment Schemes and Venture Capital Trusts also being revamped.
Generally held to be one of the most successful government-backed schemes ever created, SEIS was designed to boost economic growth in the UK by promoting new enterprise and entrepreneurship.
Since the Seed Enterprise Investment Scheme (SEIS) was launched in 2012 to 2013, 13,800 companies have received investment and around 1.4 billion of funds have been raised.
In the 2020/21 Tax Year 2,065 companies raised a total of £175 million of funds under the SEIS scheme.
In the same tax year, 9,195 investors claimed Income Tax relief on Self-Assessment forms for SEIS, compared to 8,545 investors in 2019/20.
The tax breaks are worth up to 64% of the amount invested, which includes income tax relief and capital gains tax relief.
The investor can also choose to treat some or all of the investment as being made in the previous tax year for income tax relief and offset 50% of the value of the investment against their income tax liability for the tax year immediately previous to the tax year in which the investment was made.
SEIS at a Glance
▪️50% Income Tax Relief for current or previous Tax Year (from date of Share Certificate)
▪️50% Reinvestment relief -Capital Gains write off
▪️No Inheritance Tax after 2 years
▪️No Income Tax or Capital Gains on any Profits from the sale of shares
▪️Loss Relief on any monies lost at your current tax rate
▪️Monies must remain in the company for 3 years to benefit from the above
Watch the short video above explaining SEIS
Income Tax Relief
Investors can claim up to 50% SEIS Income Tax Relief on subscriptions against income tax paid on total investments up to £200,000.
Carry Back Facility
The carry-back facility in SEIS serves to extend the period for which CGT and/or income tax investment relief can be accessed. For example, investments made in the 2022/23 tax year can be ‘carried back’ and applied to liabilities incurred in the previous 2021/22 tax year.
CGT Exempt Disposal
Capital Gains (profits) are tax-free provided that:
▪️The shares are held in a Qualifying company for a minimum period of three years post issue.
▪️The SEIS Income Tax Relief has not been withdrawn.
CGT Investment Relief
UK taxpayers can obtain an exemption for CGT liabilities of 50% of the investment. This allows them to obtain further CGT relief of up to 14%. Therefore, the SEIS Income Tax Relief and CGT Reinvestment Relief combine to give a 64% tax relief.
SEIS Loss Relief
Under circumstances where the shares an investor possesses in an Investee Company are sold at a loss (or in the event the investment fails), there are provisions to offset those losses, reducing income tax or CGT. This would, however, depend on the individual Investors’ circumstances and the overall limits as to how much can be offset. For top-rate taxpayers, loss relief is 45% on their “actual” investment (the original amount less the 50% income tax relief), which would be 22.5% of the total.
Inheritance Tax Relief
100% IHT Relief may be claimed on an Investor’s estate in most circumstances once Qualifying Shares have been held for two years.
Download Your Free SEIS Investment Guide
Learn how SEIS-eligible opportunities can offer tax-efficient growth and help diversify your portfolio. Our FREE guide explains the essentials in clear terms.
It is thanks to EIS (and SEIS) that the UK has such a vibrant start-up scene and many founders believe that they would not have got the private investment needed to grow their businesses without the schemes.
The EIS is a leading scheme of its kind. It is crucial to start-up capital and has helped to position the UK as a world leader in innovation and entrepreneurship.
