Founders and Investors - the tax incentives are still there

There are still a number of of Government schemes designed to incentivise founders and investors, with two of the most attractive being the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). EIS has been available since 1994, with SEIS introduced in 2012. Over the years we have helped many businesses put the appropriate arrangements in place and attract investment.

SEIS Tax Benefits for Investors

You can invest up to £200,000 per tax year in shares in SEIS-qualifying companies to benefit from income tax relief at 50% of the amount invested. After holding the shares for at least three years, you can benefit from capital gains tax relief on gains arising on their disposal, provided the relevant conditions are met. You may also offset losses when you dispose of the shares, either against capital gains or income. You can also claim SEIS reinvestment relief, which can exempt up to 50% of a qualifying capital gain from CGT where the relevant gain is reinvested in SEIS-qualifying shares.

Before you can claim these reliefs, HMRC must have certified that the company and share issue meet the relevant requirements. These are stringent, and it is easy to go wrong, but we can advise you on the likelihood of success.

EIS Tax Benefits for Investors

The current legislation permits up to £1 million of investment per year tax shares in EIS-qualifying companies, with the limit increasing to £2 million where the additional investment is in qualifying knowledge-intensive companies. This will allow you to benefit from income tax relief at 30% of the amount invested. To claim the relief, however, you must generally hold the shares for at least 3 years. After these 3 years, you can benefit from capital gains tax relief on gains arising on the disposal of qualifying shares. If you make a loss, you can offset the loss on disposal, either against capital gains or income. The Government encourages re-investment into EIS companies, and so you can defer an existing capital gains tax charge by reinvesting the gain in EIS-qualifying shares.