CASE STUDY

New opportunities emerging from COVID

Example

Brainy is a young entrepreneur. His technology business, focussing on coding, Artificial Intelligence and robotics has just created the first robot that will be capable of administering the COVID-19 vaccine. Sid is assisting Brainy, working as a specialist accountant that focuses on start-up businesses in the technology and AI space.

Whilst the vaccine is still being tested and prepared Betty takes an electric car using a pooling service – to go and get a COVID-test. The test is carried out at a pop-up chemist based in the function room of a new hotel. Once the test is completed, the samples taken from Betty are transported to the laboratory by a lorry that carries COVID test samples, and will also be used to transport vaccines around the country.

So, based on the above example, what businesses would be considered a qualifying trade for SEIS and EIS purposes?

Brainy’s business has been operating for less than two years with fewer than 25 employees and gross assets of less than £200,000 so the company can qualify for SEIS as well as EIS (provided the SEIS shares are issued at least one day before the EIS shares).  SEIS is aimed at smaller and risker businesses hence the tax reliefs are greater than those available under EIS to encourage investment.

Up until end of January 2021 the Future Fund is making grants of between £125,000 and £5,000,000 to businesses who have already raised funds on a matched funds basis.

Sid

Will Sid’s specialist accountancy practice focused on start-up business in the technology industry qualify for SEIS and EIS?

The answer here is simply no. Providing legal or accountancy services is considered to be an excluded activity for SEIS and EIS.

Pop up chemist

Dental and medical practices are not excluded from SEIS and EIS.  Therefore good news the investment into the pop-up chemist trade would qualify so long as the other requirements are met.  A chemist is not knowledge intensive so the limit on EIS investment is £12,000,000.

The hotel that is housing the pop-up chemist in their function room would not qualify for SEIS or EIS. Operating or managing hotels, or managing property used as a hotel or comparable establishment is an excluded activity for the purpose of SEIS and EIS.

What are you waiting for?

If you are not sure about whether the trade does qualify we can approach HMRC for you.  HMRC will want to review your Articles of Association and any Shareholders’ Agreement or investment agreements.  We draft or review these documents to make sure they comply.

We have summarised some of the interesting trading aspects.  There are other hurdles to cross to secure SEIS and or EIS relief and we can take you through those.

John Deane

John solves commercial problems for SMEs and their investors. It is said that he is unbelievably practical and seasoned in finding the right solution without too much fuss. He has an established reputation in the technology, art and media industries.

Let us take it from here

Call us on 020 7438 1060 or complete the form and one of our team will be in touch.