An Overview of the new SEIS and EIS rules
The SEIS (Seed Enterprise Investment Scheme) has been widened, allowing firms to now raise £250,000 – 66% more than before.
From April 2023, the following changes will take place:
The amount companies can raise through SEIS is going up to £250k from £150k
It will be doubled to £200k under the SEIS scheme, which allows an individual to invest up to £100k per tax year.
The two-year requirement for accessing SEIS will be increased to three years
It will increase to £350k from £200k (all assets on a startup's balance sheet).
In other words, while businesses may be reluctant to borrow money due to rising interest rates (which are putting borrowers off and reducing brokerage margins), equity appears to be a better option for entrepreneurs who need cash injections to grow their firms.
Young companies have always had difficulty raising start-up and seed capital. Untested ideas and entrepreneurs can make investors wary. Investing in new businesses is made easier by the UK Government's Seed Enterprise Investment Scheme (SEIS). They invest, you get funding, and they get a tax break. All parties benefit from this formula. Over £1 billion has been raised for UK companies with SEIS since its introduction in 2012. Make your new business a success with the investment scheme that works.
How does the Seed Enterprise Investment Scheme work (SEIS)?
The UK Government offers four venture capital schemes, including the Seed Enterprise Investment Scheme (SEIS). SEIS is designed to attract investors to young UK companies. In contrast to the SEIS, which provides cash funding, the SEIS provides tax relief. Companies can attract investment easier through the scheme since tax breaks are generously provided to investors. Consider SEIS as a seed capital magnet. Additionally, investors get tax relief on their investment in your company. This is a win-win situation.
What is the SEIS process?
By providing tax relief on investment funds, the Seed Enterprise Investment Scheme helps small, early-stage companies raise seed capital from individual investors. You can raise funds for your new company through SEIS by giving your investors a generous tax break. Investing not only allows them to save money, but also allows them to invest. In addition, SEIS offers loss relief. Therefore, investors can claim a portion of their investment back should your company fail. Investors will not be completely reimbursed, but this will soften the blow, providing an added incentive to invest.
Venture capital is not available through SEIS. This is an incentive. Cash is not provided by the government. In contrast, SEIS provides tax relief to individual investors (not companies) who buy shares in qualifying businesses. It makes it easier for those companies to attract investment.
Among the key elements of SEIS are:
The company must be based in the UK and trading for less than two years.
It must be a qualifying trade or business. (Find out more info. on what the government defines as a qualifying trade).
Investors can invest up to a maximum of £100,000 per individual per tax year.
Companies can accept a maximum of £150,000 in invested SEIS to qualify for tax relief.
The company cannot have received investment under other Government venture capital investment schemes.
The company must be carrying out a new trade. It cannot have carried out a previous trade.
Invested funds must be spent on a qualifying activity within 3 years of investment.
Individual investors only. Corporations cannot invest in new businesses under SEIS.
Some venture capital funds run SEIS-specific funds where they will invest up to the £150,000 limit of a business. These funds pool together many investors SEIS allocations allowing them to make many investments.
Zyla Accountants can assist you with your funding requirements. Schedule a call with Suzy at Zyla Accountants to discuss how we can help your business.