Seed Enterprise Investment Scheme (SEIS) Explained

The Seed Enterprise Investment Scheme (SEIS) was introduced by HMRC to help exciting early-stage businesses raise equity capital.

HMRC wanted to make the prospect of investing in early stage companies more attractive.

To encourage investors to consider investments they may have previously dismissed, HMRC offers high levels of tax relief to investors for investing through schemes such as SEIS.

Income Tax Relief 

A generous Income Tax relief of 50% is available to eligible investors who invest in qualifying companies. Shares must be held for 3 years, if shares are disposed of within this period, relief will be reduced.

Use the calculator below to find out how much you could get off your tax bill when you invest in a SEIS qualifying company.

Example:

Simon invests £10,000 in a qualifying SEIS company and receives a 50% income tax relief of £5,000.

Investment = £10,000

Income Tax Relief = £5,000

Tax bill prior to relief = £15,000

Tax bill after relief = £10,000

Simon’s tax bill was £15,000, taking into consideration the tax relief, he now only has to pay £10,000.

Capital Gain Tax Exemption

If an eligible investor has hold shares bought under SEIS, received income tax relief and dispose of the shares after three years, all gains will be exempt from capital gains tax.

If a part of the share are sold before three years they will not receive capital gains exemption or income tax relief.

Loss Relief

If the company receiving capital through SEIS goes into liquidation and the investor makes a loss on the investment, the investor would be able to claim loss relief against income tax of 45% of the net capital invested.

The calculator above assumes that when the company is wound up there is nothing left over for the investors and the investor pays the higher tax rate of 45%.

In such a case, investors’ net loss after tax relief is only 27.5% of the capital invested.

Example:

Sally invests £10,000 in a qualifying SEIS company and receives a 50% income tax relief of £5,000.

Unfortunately, the company is wound up and investors receive nothing. Sally’s capital at risk is £5,000 and she gets a 45% loss relief so her net loss is £2,750.

 

Investment = £10,000

Income Tax Relief = £5,000

Capital at risk  = £5,000

Loss relief = £2,250

Sally’s total net loss = £2,750

 

For further information, please visit HMRC.

 

Information provided is subject to change and may contain inaccuracies. Please consult a professional tax advisor to discuss your eligibility.