EIS SEIS Investments

SEIS & EIS investment schemes encourage investment in start ups and growth stage businesses.

There are two generous tax breaks available to Angel Investors looking to invest in off market investment opportunities. The Enterprise Investment Scheme [EIS] and Seed Enterprise Investment Scheme [SEIS] are UK Government Investment schemes, both offering tax breaks which can be 'carried back' to the previous tax year. This is a great way of reducing tax liabilities whilst help fledgling Founders establish and scale their business. 

EIS – Enterprise Investment Scheme

The Enterprise Investment Scheme is designed to help smaller, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify. For the investor, it’s a tax efficient way to invest in small companies. This scheme is generally aimed at companies seeking significant investment to scale, which may even become the next Unicorn.

The EIS is aimed at wealthier, sophisticated investors, who can invest up to £1,000,000 in any tax year. By doing so 30% tax relief is offered.

If you do claim EIS you will be locked into the scheme for a minimum of three years. The Uk Government uses this scheme to encourage Angel Investors use EIS to invest into unlisted companies, just like all Investments on Angels UK.

 

SEIS – Seed Enterprise Investment Scheme

SEIS was introduced in April 2012 and is an incredibly enticing derivative of the Enterprise Investment Scheme (EIS) . Its encourages seed stage investment [Usually up to Series A rounds of investment] in early stage companies. Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares. 

The maximum amount to be raised for each company is £150,000.

How does the Enterprise Investment Scheme scheme work?

EIS is designed so that a company can raise money from investors in return for equity / shares in their business. Angel Investors are offered tax relief when invest in a business. An approved company can raise up to £5 million each year under the EIS,  with a maximum of £12 million during the lifetime of the company . This also includes amounts received from other venture capital schemes.

A investee company must receive investment within 7 years of its first commercial sale.

EIS [Enterprise Investment Scheme] has specific rules that must be followed in order for investors to claim and keep their tax reliefs. Angel Investors must keep their investments for a minimum of  3 years after the investment is made.

EIS is not available for the following types of trades

Investors must see sight of an approval form from HMRC in order to recieve EIS. Most organisation will qualify, including any R&D which leads to that business becoming a qualifying business.

If a company condusts more than 20% of of their business it may not qualify: these include;

  • legal or financial services
  • leasing activities
  • coal or steel production
  • farming or market gardening
  • nursing homes
  • property development
  • hotels
  • energy generation, [electricity and heating]
  • gas or other fuel production
  • banking, insurance, debt or financing services
  • The ful list... EIS / SEIS Exclusion

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