What we will cover What is the thinking behind SEIS and EIS Summary of hurdles Tripwires
What we will cover
What is the thinking behind SEIS and EIS
Summary of hurdles Tripwires
SEIS
• Hard for Companies to get funding from Banks
• Low interest rates on savings• SOLUTION? SEIS and EIS
SEIS – Headline Benefits
• Invest up to £150,000• Individual up to £100,000• Income tax relief 50% • No CGT• Further income tax relief if Company fails
• it
SEIS
• Must be a company• Unquoted• Assets of less than £200,000 pre-
SEIS• Must not be controlled by another
company• Maximum SEIS £150,000• Qualifying Trade
SEIS Company Criteria
SEIS Company Criteria
• Most property based trades don’t qualify
• Lawyers, Accountants and Banks don’t qualify
• Service based trades may qualify e.g. Financial Advice
• Up to 20% Excluded Activities OK
Qualifying Trade
Qualifying Trade
Individual
• Not an associate (business partner, spouse, parent, grandparent)
• Siblings OK• UK tax payer• Not a reciprocal arrangement• Not an employee (directors OK for
SEIS, angel directors OK for EIS)
What if it doesn’t work out?
If the Company Fails
• If the Company fails investor can offset loss against income tax at whatever rate of tax you pay.
• E.g. Salary = £50,000; pay approximately £9,800 tax
• Initial Investment = £10,000• Initial SEIS relief = £5,000• Company fails = up to 45% relief set
against tax
Trip Wires
• Make sure have a bank account• Beware benefits e.g. repayment of loan• Controlled by a Company• Not a Qualifying Trade• Associates• Hold shares for 3 year minimum
Legal Considerations
• Legal Considerations• Don’t jeopardise future investment• Drag Along• Minority Protections e.g. Tag along, pre-
emption rights, voting thresholds• al Consideration
EIS Company Criteria
• Must be a company• Unquoted• Assets of less than £15,000,000 pre-EIS• Must not be controlled by another
company• Maximum EIS per person £1,000,000• Total Venture Capital £5,000,000 p/a• Fewer than 250 employees
EIS Tax Benefits
• 30% Income tax relief immediately• No CGT• Loss Relief to amount of loss set against
income tax or capital gains• E .g invest £100,000, initial tax relief
£30,000. Business fails – can use loss relief at 45% (if that is your income tax relief) on £70,000 cash invested – net loss £38,500 (loss relief @45% = £31,500)