SEIS & EIS Lawyers

We have specialist SEIS and EIS lawyers who can assist with implementing your plans.

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SEIS & EIS Investment Schemes

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)
Enterprise Investment Scheme (EIS) 

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.

What is SEIS and what are the benefits of it?
Similar to EIS, SEIS is aimed at start-up companies and individual investors who are looking to make equity investments in a start-up company.

Investors can claim income tax relief, up to an annual investment limit of £100,000, for funds used to subscribe for new ordinary shares issued by qualifying companies (again, there are several criteria to meet). The investor’s income tax liability is reduced by 50% of the sums invested, up to the annual investment limit (for each investor), provided the shares are held for three years. Further, a SEIS investor whose income tax liability has reduced because of SEIS relief on shares is also potentially entitled to exemption from CGT on a disposal of those shares, on the basis that the shares have been held for three years.

Again, to ensure qualification is met, companies and investors alike can seek advance assurance from HMRC that EIS applies.

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.

Enterprise Investment Schemes (EIS)
EIS allows an investor to subscribe for new shares in a qualifying company and to obtain income tax relief on the investment. If the shares are held for three years after the investment is made, any subsequent gain on them is not subject to Capital Gains Tax (CGT).

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.

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.

FAQs

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.

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