SEIS and EIS encourage investment in new companies by offering investors significant tax relief.
What is SEIS?
Initially, a new company can receive up to £150,000 from investors through the Seed Enterprise Investment Scheme (SEIS). In return, the investor will receive a 50% tax break on the total amount invested. After the company has allocated the initial £150,000 investment, it can offer EIS to any future investors.
What is EIS?
A company can raise up to £5 million each year through Enterprise Investment Schemes (EIS), and a maximum of £12 million in the company’s lifetime.
EIS allows an individual to invest up to £1m each tax year and in return, they will receive a 30% tax break.
What is the difference between SEIS & EIS?
Firstly, SEIS is:
- Only available to new companies
- The total amount of investment available is £150,000
- The investor will receive a 50% tax break on the total amount invested
Whereas EIS is:
- Is available to companies within 7 years of their first commercial sale
- The total amount of investment is £12 million in the company’s lifetime
- The investor will receive a 30% tax break on the total amount invested
With both schemes:
- The investor will pay no capital gains tax on any profit arising from the sale of their shares. However, they must have held the shares for at least three years
- If the investor sells their shares at a loss, they may offset the loss against their capital gains tax
How can SEIS and EIS investment schemes help my startup business?
In conclusion, investing in a startup business can be extremely risky. By offering investors tax relief they will be more inclined to take a risk and invest in a new company.
For the most up-to-date tax relief information, including a full list of SEIS and EIS eligibility and how to claim always check with HMRC.
*When investing your capital is at risk*