Founders and Investors – the tax incentives are still there

Last Updated: March 25th, 2024

There are still plenty of Government schemes set up to incentivise founders and investors. Two of the most attractive are the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). EIS is ancient having been around since 1994 joined by the SEIS from 1994. Over the years we have set up arrangements for many businesses and helped them attract investment.

SEIS Tax Benefits for Investors

You can invest up to £200,000 a tax year in shares in SEIS-qualifying companies to benefit from income tax relief at 50% of the amount invested. After 3 years, you can benefit from capital gains tax disposal relief on any shares disposed of at a profit. You may also offset losses when you dispose the shares, either against capital gains or income. You can also write off up to half of an existing capital gains charge if you re-invest the gain in SEIS-qualifying shares.

Before you can claim these reliefs, HMRC need to certify that the company and the share issue meet the 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 in new shares in EIS-qualifying companies. This will allow you to benefit from income tax relief at 30% of the amount invested. To claim the relief, however, you must hold the shares for at least 3 years. After these 3 years, you can benefit from capital gains tax disposal relief on any shares disposed of for a profit. If you make a loss, you can offset any losses 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 if you re-invest the gain in EIS-qualifying shares.

 

Elliot McGahan

I am a member of the dispute resolution team and love every minute. It is demanding as you are required to assimilate detail very quickly and apply the law being better of course than the other side. I work with a strong team which is a privilege.

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