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SEIS: the vital statistics

Starting with the most important, the total tax benefit available to SEIS investors may be 78% relief in the 2012/2013 tax year. This is on the basis that the investment itself attracts 50% income tax relief. The really eye popping point to note here is that the 50% exemption applies regardless of whether the investor is a 50% taxpayer. The remainder of that relief can be attributed to the capital gains tax holiday that investors enjoy – being an exemption from CGT on gains rolled over from disposals in the same tax year.

However, there are some other numbers to watch out for too. For example, the limit on the amount that can be invested is £100,000 in a year, or £150,000 over two or more years. Some commentators have said that these limits are simply too low.

On the other hand, the scheme only applies to companies that have assets of less than £200,000 at the point of investment, so a £100,000 shot in the arm would be a significant amount of money for them.

Aside from the asset qualification, SEIS qualifying companies cannot employ very many employees – at present the guidance says that there cannot be more than 25 people working for there. And the length of time the company has been trading is important too: if a company has been up and running for more than two years, it may not count as sufficiently “new”.

There are of course other issues that need to be taken into account when deciding whether an investment would be SEIS compliant. The scheme is not available to people who want to invest in their own companies, or in those whose companies employ them. The point of the scheme seems to be to encourage genuinely “new” investment.

But a further consideration is the nature of the business that is carried on by the company. It has to be within an “approved” sector, which cannot include financial services.