Kirkpatrick & Hopes - Succession Planning Accountants

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Seed Enterprise Investment Scheme

Seed Enterprise Investment Scheme INCOME TAX

The SEIS provides for extensive Income Tax and Capital Gains Tax breaks for investors and this greatly encourages much needed seed capital in new businesses. The SEIS is most valuable for taxpayers who can fully benefit from the tax reliefs on offer. The scheme was made permanent in 2014.

For investors the main benefits of the scheme are as follows:

  • Income Tax relief worth 50% of the amount invested to qualifying individual investors on a maximum annual investment of £100,000.
  • A 50% exemption from Capital Gains Tax on gains reinvested within the scope of the SEIS. The maximum gain to be relieved is capped at £100,000 and the relief will be withdrawn if the SEIS relief is ultimately withdrawn.
  • There is a 100% exemption from CGT on the sale of shares more than three years after the date on which they were issued.
  • An SEIS investment will normally qualify for 100% relief from Inheritance Tax where the usual conditions are met.The availability of both Income Tax and Capital Gains Tax relief has made the SEIS very popular, especially with wealthy taxpayers. The reliefs are only available where there is sufficient liability against which to set it. Under certain circumstances, small business owners can also use the scheme to invest in their own businesses.

    There are a number of conditions which must be met in order to invest in the scheme. For example, the scheme can only be used to invest in small companies i.e. companies with gross assets of no more than £200,000 and with less than 25 employees. A company can raise a maximum of £150,000 through the SEIS but can go on to use other schemes such as the EIS to raise further funds.

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