SEIS & EIS Investment Schemes
We have specialist SEIS and EIS lawyers who can assist with implementing your plans.
At Herrington Carmichael we have specialist SEIS and EIS lawyers who can assist with implementing your plans.
As companies look to grow, external investment is often turned to by businesses through the provision of extra capital to fund growth plans. However, many external investors are reluctant to invest in a business until they fully understand the consequences of doing so, which includes the taxation impact of the investment.
The Enterprise Investment Scheme (“EIS”) and the Seed Enterprise Investment Scheme (“SEIS”) are tax-efficient government-backed schemes which allow qualifying businesses to fundraise from investors who are tax-resident in the UK.
Seed Enterprise Investment Scheme (SEIS)
The Seed Enterprise Investment Scheme (“SEIS”) and the Enterprise Investment Scheme (“EIS”) are tax-efficient government-backed schemes which allow qualifying businesses to fundraise from investors who are tax-resident in the UK.
Seed Enterprise Investment Scheme (SEIS)
SEIS is primarily targeted at start-ups meaning it is not available if the company has been carrying out the business activity for which inward investment is being sought for a period of more than two years.Qualifying for SEIS investment
There are a number of criteria which a company has to meet to qualify for SEIS investment, and our corporate team can assist you in determining whether your business qualifies and can liaise with HM Revenue & Customs on your behalf to confirm your qualification to both schemes.Support with EIS or SEIS
If you are seeking investment through the EIS or the SEIS route, our corporate team can guide you through the entire process. We are able to support you in preparing all the documents you need in order to implement EIS or SEIS investment, which may include a subscription agreement, new Articles of Association and corporate ancillary documents.Enterprise Investment Scheme (EIS)
What is EIS and what are the benefits of it?
EIS was initiated to encourage individual investors to invest in small, higher-risk trading companies to help alleviate and deter any problems that smaller, high-risk trading companies have in raising equity finance.EIS is designed to give investors, who subscribe for shares in a business, tax relief on their investment. Investors can claim income tax relief for amounts used to subscribe for new shares in a company, up to an annual investment limit of £2 million for shares issued on or after 6 April 2018 provided over £1 million is invested in knowledge-intensive companies. There are several criteria for a business to qualify as being a knowledge-intensive company, one such criteria being that in at least one of the relevant three preceding years, at least 15% of operating costs of the company consisted of research and development or innovation (R&D) expenditure.
In such circumstances, the income tax liability of the investor is reduced by 30% of the sums invested up to the annual investment limit, on the basis the shares are held for at least three years.
Additional tax reliefs are potentially available for EIS investors qualifying for some income tax relief on shares, in that exemption from CGT on a disposal of those shares is potentially available provided the shares have been owned for the requisite three years.
To ensure qualification is met, companies and investors alike can seek advance assurance from HMRC that EIS applies.
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Case Study: Streamlining Operations
Learn how we improved efficiency our client
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Analysis
Case Study: Streamlining Operations
Learn how we improved efficiency our client
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Analysis
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EIS funding for cloud-based data archiving company
Herrington Carmichael’s specialist tech Mergers & Acquisitions team led another successful fundraise round for Arkivum.
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Frequently Asked Questions
Find answers to your most pressing questions about our services and processes.
What is the criteria for SEIS?
SEIS has specific criteria for both companies seeking investment and investors participating in the scheme.
Companies:
The key criteria for companies includes:
- being an unquoted company (meaning that they do not trade their shares on a recognised stock exchange)
- having a permanent UK establishment
- employing fewer than 25 employees
- having gross assets under £350,000
Additionally, the company must be less than two years old.
Investors:
For investors looking to benefit from SEIS, the key criteria is that they must:
- be unconnected to the company
- not hold more than 30% of its shares
- invest in eligible shares
If these, and other relative criteria, are met, SEIS offers attractive tax incentives to investors supporting early-stage, high-risk startups.
What is the criteria for EIS?
EIS provides tax incentives for investors supporting small and medium-sized enterprises (SMEs). EIS has specific criteria for both companies seeking investment and investors participating in the scheme.
Companies:
To qualify for EIS, companies must
- not trade their shares on a recognised stock exchange
- have a permanent UK establishment
- have gross assets under £15 million before the investment
- fewer than 250 full-time employees
Investors:
Investors looking to benefit from EIS must:
- not be an employee of the company (but may be an unpaid director)
- subscribe for new, full-risk ordinary shares in an eligible company
- the investment must be held for a qualifying period
EIS offers income tax relief, capital gains tax benefits, and potential loss relief to incentivise investment in qualifying, higher-risk businesses.