What we will cover

What is the thinking behind SEIS and EIS

Summary of hurdles Tripwires

SEIS

• Hard for Companies to get funding from Banks

• Low interest rates on savings• SOLUTION? SEIS and EIS

SEIS – Headline Benefits

• Invest up to £150,000• Individual up to £100,000• Income tax relief 50% • No CGT• Further income tax relief if Company fails

• it

SEIS

• Must be a company• Unquoted• Assets of less than £200,000 pre-

SEIS• Must not be controlled by another

company• Maximum SEIS £150,000• Qualifying Trade

SEIS Company Criteria

SEIS Company Criteria

• Most property based trades don’t qualify

• Lawyers, Accountants and Banks don’t qualify

• Service based trades may qualify e.g. Financial Advice

• Up to 20% Excluded Activities OK

Qualifying Trade

Qualifying Trade

Individual

• Not an associate (business partner, spouse, parent, grandparent)

• Siblings OK• UK tax payer• Not a reciprocal arrangement• Not an employee (directors OK for

SEIS, angel directors OK for EIS)

What if it doesn’t work out?

If the Company Fails

• If the Company fails investor can offset loss against income tax at whatever rate of tax you pay.

• E.g. Salary = £50,000; pay approximately £9,800 tax

• Initial Investment = £10,000• Initial SEIS relief = £5,000• Company fails = up to 45% relief set

against tax

Trip Wires

• Make sure have a bank account• Beware benefits e.g. repayment of loan• Controlled by a Company• Not a Qualifying Trade• Associates• Hold shares for 3 year minimum

Legal Considerations

• Legal Considerations• Don’t jeopardise future investment• Drag Along• Minority Protections e.g. Tag along, pre-

emption rights, voting thresholds• al Consideration

EIS Company Criteria

• Must be a company• Unquoted• Assets of less than £15,000,000 pre-EIS• Must not be controlled by another

company• Maximum EIS per person £1,000,000• Total Venture Capital £5,000,000 p/a• Fewer than 250 employees

EIS Tax Benefits

• 30% Income tax relief immediately• No CGT• Loss Relief to amount of loss set against

income tax or capital gains• E .g invest £100,000, initial tax relief

£30,000. Business fails – can use loss relief at 45% (if that is your income tax relief) on £70,000 cash invested – net loss £38,500 (loss relief @45% = £31,500)