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Higher risk investments

Seed EIS

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ENTERPRISE INVESTMENT SCHEMES (EIS) INVEST IN ASSETS THAT ARE HIGH RISK AND CAN BE DIFFICULT TO SELL SUCH AS SHARES IN UNLISTED COMPANIES.

THE VALUE OF THE INVESTMENT AND THE INCOME FROM IT CAN FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK WHAT THEY ORIGINALLY INVESTED, EVEN TAKING INTO ACCOUNT THE TAX BENEFITS.

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What is the Seed Enterprise Investment Scheme?

The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. It complements the existing Enterprise Investment Scheme (EIS) which offers tax reliefs to investors in higher-risk small companies.
SEIS is intended to recognise the difficulties that very early stage companies face in attracting investment, by offering tax relief at a higher rate. Some EIS portfolios may invest in SEIS qualifying companies. Under the platform, investors are afforded tax incentives in return for injecting enterprise capital into AIM listed or unlisted companies.

Tax incentives

There are restrictions on the size of business that can receive SEIS qualifying investment: some types of business are excluded. The SEIS offers five tax incentives to private investors who are resident in the UK for tax purposes:

  • Up to 50% upfront income tax  relief
  • Tax free growth
  • Tax relief on any investment losses
  • Up to 100% inheritance tax relief
  • Capital gains tax reinvestment relief

SEIS provides income tax relief of up to 50% for individuals who invest in shares of qualifying companies, with an annual investment limit of £100,000 for individuals, and £150,000 per company. Companies must have a trading history of under two years.
Capital gains tax reinvestment relief provides relief on 50% of the qualifying gains invested in SEIS qualifying companies.