harry glasstone complete accounting solutions 12 June 2014
What is SEIS? Purpose Government initiative To help small businesses/early stage companies get access to funding Those beyond friends & family and too low for typical investors/VCs
How does it work? 1. Companies must qualify 2. Investor purchases shares 3. Investor gets credit on their tax return 4. Company gets funding
Who can I offer SEIS shares to?
What does my investor get? Income tax relief of 50% up to £100k CGT relief on 50% of a gain Possibility to carry back benefits They can be a director (not an employee) They cannot own more than 30% Full-risk ordinary shares Three year window Negligible value relief No CGT on disposal
What does my investor get? (Where capital gain in year and beyond) Successful investment 50% inome tax relief 14% CGT relief TOTAL 64% BACK + SUCCESSFUL COMPANY Failed investment 50% inome tax relief 14% CGT relief 22.5% negligible value relief TOTAL 86.5% BACK
Does my venture qualify? UK permanent establishment (3 years) Unquoted issue) Size < 25 employees issue) Trade < 2 years old & only trade of company No prior EIS/VCTs Spend all funds within 3 years Carry on/preparing to carry on trade or R&D used in or benefiting a trade (3 years) Independent (not controlled) Gross assets < £200,000 issue) SEIS Funding < £150,000
Does my venture qualify? Most do – these DON’T: Dealing in land/commodities/ futures/shares Dealing in goods other than in an ordinary trade/ retail/wholesale Financial activities Leasing/letting assets Receiving royalties or licence fees Accounting/legal Property development Farming/market gardening Holding/managing woodlands Shipbuilding Coal production Steel production Operating/managing hotel or nursing home Providing services to those who business in an excluded activity
What next? 1. You must have a company setup 2. Apply to HMRC for Advance Assurance 3. Attract investors – term sheets 4. Get investment 5. When you have traded for 4 months or spent 70% - apply for SEIS certificates
Too big for SEIS? Don’t worry... EIS could be available
What is EIS? The big brother (and predecessor) to SEIS Annual investment limit of £5 million Investor gets 30% of investment income tax credit (vs 50% on SEIS) Investor cannot be connected CGT deferral relief CGT free disposal after 3 year
Does my venture qualify for EIS? Similar criteria to SEIS Likely to be a qualify trade for EIS if qualified for SEIS Some differing criteria eg. Cannot be connected/director eg. Gross assets test
Can I use SEIS and EIS YES!! Once you have spent 70% of your SEIS funding you can raise money under EIS
EIS process 1. Apply to HMRC for Advance Assurance 2. Attract investors – term sheets 3. Get investment 4. When you have traded for 4 months or spent 70% - apply for SEIS certificates
harry glasstone complete accounting solutions t: