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Slides from our free legal seminar on the Seed Enterprise Investment Scheme (SEIS). To attend other seminars, visit www.buckworthsolicitors.co.uk
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www.buckworthsolicitors.co.uk
Taking Advantage of SEIS
Presented by
Michael Buckworth
www.buckworthsolicitors.co.uk
What are we covering?
• Who am I? • What is SEIS? • What are the requirements for the Company? • What are the requirements for the Investors? • What structures work? • What is the procedure? • Q&A session
www.buckworthsolicitors.co.uk
Who am I?
Career • Studied law at Merton College, Oxford University
• Trained and qualified at Shearman & Sterling LLP and subsequently pracKced at Cleary GoMlieb Steen & Hamilton LLP
• Set up Buckworth Solicitors in 2011 Ra'onale of the firm • To provide access to legal advice of the same quality as that given
by a top City of London law firm but at much more affordable rates
• Fixed fees
• Service culture
www.buckworthsolicitors.co.uk
What is SEIS?
• (Seed) Enterprise Investment Scheme
• Tax rebate scheme
• High risk investments • Startup companies • Full risk investments • No preferenKal treatment
• IncenKvise high net worth individuals
www.buckworthsolicitors.co.uk
Why is SEIS relevant to startups?
• Give an income tax refund to investors equal to 50% • Reduces risk of investment to investor – i.e investor risks
£50,000 of cash and not £100,000
• Can make investment cheaper for the company
www.buckworthsolicitors.co.uk
Example of Relief Calculation
SEIS • Income Tax Relief
• Investor invests £100k under SEIS in tax year 12/13 • Investor has income tax bill of £50k (derived from salary
of £142,185) • 50% of investment (i.e £50,000) is reduced from
investor’s tax bill • Tax bill = £0
• CGT Reinvestment Relief • Investor reinvests £100k gain under SEIS in tax year
12/13 • Investor’s gain is not subject to CGT at marginal rate
www.buckworthsolicitors.co.uk
What are the specific reliefs under SEIS?
• 50% income tax relief up to an annual investment limit of £100,000
• Roll back relief to previous tax year
• CGT reinvestment relief on reinvestment of gain on disposal of assets or shares 2012/2013 tax year only. No deferred gain permiMed
• CGT relief at 100% on disposal of SEIS shares aeer 3 years
• Loss relief at 100%
www.buckworthsolicitors.co.uk
What are the Company requirements? SEIS
• Gross assets not exceed £200,000 immediately prior to issue of shares
• Unquoted
• Exists solely for purpose of carrying on a qualifying acKvity
• Qualifying trade. NB royalKes and license fees
• Independent i.e not a 51% subsidiary
• No EIS/VCT investment prior to issue of SEIS shares
• Purpose of share issue to carry on qualifying acKvity and must be used within 3 years
• UK permanent establishment
• Less than 25 full-‐Kme employees
• £150,000 investment limit over the lifeKme of the Company
• Not in financial difficulty
www.buckworthsolicitors.co.uk
What are the Investor requirements? SEIS
• Investment must be made for genuine commercial reasons and not for tax avoidance purposes
• Investment must be paid up in full, in cash and before the shares are issued
• No reciprocal arrangements with a third party
• Shares held for no less than 3 years
• No stake higher than 30% prior to or during SEIS period • Issued share capital/voKng rights • EnKtlement to assets on a winding up
• Not an employee during 3 year period (or prior to the 3 year investment period). Can be a paid director but the 30% rule applies
www.buckworthsolicitors.co.uk
Structure
• Full-‐risk ordinary shares
• No debt/converKble debt
• No preference shares
• No redeemable shares
www.buckworthsolicitors.co.uk
Procedure
• Advance assurance
• Company issues compliance statement
• HMRC issues cerKficate
• NB withdrawal of relief • Disposal within 3 years • Grant of call opKon • Receipt of value – repayment/redempKon/repurchase of
share capital, repayment of debt, release investor from liability, provide asset at less than market value
• Relief may be withdrawn if a paid director under SEIS invests under EIS. Safer approach to be an unpaid director under SEIS and later become a Business Angel under EIS
www.buckworthsolicitors.co.uk
• Fixed fee services
• IncorporaKon
• Shareholders’ Agreements, Founders’ Agreements
• Investment and security documentaKon
• Website terms and condiKons, privacy policy
• Customer contracts
• M&A transacKons
• Further InformaKon • Take our free “IntroducKon to startup law” booklet • Check out our website at www.buckworthsolicitors.co.uk
How can we help?
Berkeley Square House | Berkeley Square | Mayfair | London W1J 6BD
www.buckworthsolicitors.co.uk
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