About SEIS

The Seed Enterprise Investment Scheme (or SEIS, for short) is a relative newcomer to the financial world. Announced in the Chancellor’s 2011 Autumn Statement, the scheme offers substantial tax reliefs to those who invest in start-up businesses.

The businesses that qualify are small ones, and here small, according to Her Majesty’s Revenue and Customs, means those businesses with fewer than 25 full time equivalent employees, and assets of £200,000 or less at the point of the SEIS investment.

But the business being carried on by a SEIS company must also be new – less than 2 years old – a qualification that applies to the underlying business as much as to the corporate vehicle itself. So you cannot start up a company with a view to getting SEIS investments for a business that you have been running for longer than that.

There are other limitations that apply too. The SEIS company must be viable, so the scheme cannot be used to prop up or rescue companies that are on their last legs. There are also restrictions on the industries in which SEIS companies can operate. They cannot, for example, be financial services companies.

So what attracts individual investors to these SEIS companies? Apart from the opportunity to be involved in exciting start-ups, SEIS investors will benefit from some eye popping tax reliefs. Firstly, from the point of view of Capital Gains Tax, there is a one year holiday on gains that have been rolled over into SEIS investments. So if you have made a gain from a disposal in another sector, or from other shares and decide to reinvest the funds into a SEIS companies, that gain gets a “holiday” from CGT for 2012/2013 financial year.

But the cherry on the cake has to be the income tax relief available. A SEIS investor gets 50% relief regardless of the rate that they actually pay.