Tax-relief schemes may help start-ups and established businesses attract outside investment when traditional investment is not viable, a major regulator has said.
The Institute of Chartered Accountants in England and Wales (ICAEW) said initiatives, such as the seed enterprise investment scheme (SEIS) and the enterprise investment scheme (EIS), may help even the smallest of firms raise capital.
One of four venture capital schemes, the SEIS is designed to help start-ups raise money in the earliest stages of business by offering tax reliefs to individual investors who buy new shares in the company.
While a business can only receive a maximum of £150,000 through SEIS investments, investors will get 50 per cent income tax relief on qualifying shares. In addition, any shares held by an investor for more than three years can be sold without incurring capital gains tax.
To qualify, your business must be less than two years old and at the time of investment have no more than £200,000 in gross assets, fewer than 25 employees, and not previously carried out a different trade.
The EIS, meanwhile, is targeted at investors seeking to invest in established businesses. Scale-ups can raise up to £5 million each year, up to a maximum £12 million in a company’s lifetime (including amounts raised from other venture capital schemes, such as the SEISS).
Investors will receive 30 per cent income tax relief on qualifying shares under the EIS
To qualify, your business must have no more than £15 million in gross assets, fewer than 250 employees, and, at the time of investment, it has been more than seven years since your first commercial sale.
Commenting on the report, the ICAEW said both schemes offer attractive tax relief for investors.
“When the opportunity arises, I recommend using that as a mechanism for raising funds,” said author and ICAEW accountant Peter Tucker.
He added: “In order for an investor to have confidence that they will get the tax relief, we recommend making an advance assurance application to HMRC that the proposed trade qualifies for EIS tax relief.”
Once approved, the company must submit the compliance statement EIS1, alongside other supporting documentation. This may include the company’s business plan and financial forecasts, a copy of the latest accounts (if available), which companies will use the investments (if part of a group), and details of all trading and activities to be carried out.
For help and advice with related matters, please get in touch with our corporate finance and accounting team today.
“Richard Anthony case study – Terry Lewis – Jaques Samuel Pianos Widely considered to be London’s leading piano retailer, Jaques Samuel Pianos has grown considerably from its humble beginnings in the front room of Mr Samuel’s home in Notting Hill. They are now internationally recognised and have provided pianos for high-profile clients like Queen and […]”
Terry Lewis – Jaques Samuel Pianos
“Richard Anthony: ‘a super-star firm’ MT Finance is a property finance lender, specialising in bridging loans and auction finance. They assist numerous property professionals, business owners, and individuals with their finance requirements and specialise in short-term asset-based lending. Founder and Director, Tomer Aboody, knew that as an asset-based lender, the business would require an expert […]”
Tomer Aboody – MT Finance
“A family fairground success story The Botton family have been running a traditional fairground, arcade and amusement park in the heart of Skegness since taking over the Pleasure Beach in 1965. Jim, the Director of the company, took over from his father and now heads day-to-day activities and administration. He said: “The Pleasure Beach is […]”
Jim Botton – Pleasure Beach (Skegness)