Seed Enterprise Investment Scheme (“SEIS”) Print
SEIS is specifically aimed at helping companies in their pre-trading, formative state. There is an upper limit of £150,000 on the amount of qualifying SEIS that may be raised by any one company.
The maximum investment by an individual is £100,000 per tax year, and income tax relief is given at the rate of 50%. As for EIS, similar restrictions prevent employees from qualifying for the relief, and the maximum investment by an individual is limited to 30% of the SEIS company.
Unlike EIS, a qualifying investment in a SEIS company cannot be used to defer gains made on the disposal of other chargeable assets. Instead where the SEIS investment is made out of the gains arising on the realisation of other assets, then 50% of the gain reinvested into the SEIS company is exempt from CGT. Accordingly, the effective rate of CGT relief is up to 14%.
A claim for SEIS may be made to treat the investment as made in the previous year, so SEIS investments made during the year 2021/22 may be treated as made in 2020/21. A claim to carry back the SEIS relief to the previous year must incorporate both parts of the relief. It is not possible to claim the income tax element of the relief in say 2021/22 and to carry the CGT element back to 2020/21.
Gains on the disposal of SEIS shares held for the qualifying 3-year period are exempt from CGT.
As the relief is targeted for investment in pre-trading companies this type of investment is very high risk, and is limited to the smallest companies with 25 employees or fewer and gross assets of up to £200,000.
The rules regarding individuals who qualify for this relief, and the trading requirements of the issuing company are very similar to those for EIS.