• EIS and SEIS tax reliefs can apply to certain new share subscriptions in risky trading companies by UK resident private individuals, thereby reducing the initial net cost of their investment.
  • SEIS is the “little brother” of EIS with similar rules except a few relaxations, and for “new trades” only.
  • SEIS investors typically subscribe for shares before EIS investors.
  • Subject to the investor’s tax position, EIS and SEIS give tax relief of 30p and 50p in the £1 respectively.
  • Many rules, conditions and pitfalls. e.g. directors (typically cannot benefit from EIS unless business angels who then become “unpaid” directors but can under SEIS), “connection”, subsidiaries etc.
  • The investee company must exist wholly to carry on a qualifying trade (certain less risky activities excluded) or preparing to carry on a qualifying trade.
  • Advance Assurance” application to HMRC available for the company. This is not mandatory but can help to attract investors. But not confirmation that personal tax relief is due, only that trade qualifies. (Considerable information is now required up front to complete this application. e.g. investor names).
  • The issuing company must be UK resident or have a permanent establishment in the UK (EIS & SEIS).
  • Process for company applying for EIS 3 certificates for investors starts with EIS 1 (or SEIS 1). HMRC then issues EIS 2 (or SEIS 2) showing key dates etc. Blank EIS 3 (SEIS 3) certificates for the investors completed by the Company, then given to the investor to claim tax relief. Backstop date to submit an EIS 1 is 2 years after the investment, for SEIS 1 there is currently no backstop date as such.
  • Carry back relief to the previous year is possible, CGT exempt after 3 years, CGT deferral for EIS, can exempt 50% of other gains with SEIS. CGT and income tax relief may be available if a loss is made. Clawback of income tax relief can occur – e.g. if subsequent “value received” for example.
  • Maximum investment in a tax year per individual - £1 million under EIS (£100K under SEIS).
  • Up to £5m per year can be raised under EIS by a company subject to lifetime limit of £12m. Max company limit for SEIS is £150,000 in a 3 year period.
  • Maximum number of full-time employees 250 for EIS and 25 for SEIS.

(This is based on legislation currently in force and is not to be construed as investment or tax advice).

Click here to see more related articles or here to book an initial free consultation with out tax director Jon Miles, or just contact him on 01225325580 or jm@richardsonswift.co.uk

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"EIS and SEIS tax reliefs can apply to certain new share subscriptions in risky trading companies by UK resident private individuals."

Jon Miles