Changes to the Seed Enterprise Investment Scheme (SEIS)

The UK has long been a hub for budding entrepreneurs and start-ups, with innovative ideas and new businesses emerging every day.

The Government recognises the importance of supporting these early-stage businesses to stimulate economic growth and job creation.

One such initiative designed to support these start-ups is the Seed Enterprise Investment Scheme (SEIS).

Introduced in 2012, the SEIS is a tax relief initiative aimed at encouraging individual investors to invest in early-stage, high-risk start-up businesses.

SEIS offers generous tax benefits to investors who are willing to support qualifying businesses in their infancy.

What is the Seed Enterprise Investment Scheme?

The SEIS is a great option for newly established businesses seeking investment.

During the initial start-up of a business, one of the main obstacles to overcome is securing financing for expansion.

The SEIS is designed to assist your business in raising funds during its initial two years of operation.

This is achieved by providing appealing tax incentives to investors who purchase new shares in your business.

Being approved for SEIS not only enhances a business’s reputation and credibility among investors and the wider business community, but it also helps start-ups connect with potential investors, visionaries and industry leaders.

This additional support fosters growth and development, providing a strong foundation for the start-up to thrive.

Before applying for the SEIS, it is crucial to verify if your company is eligible for the funding.

Your business can use the scheme if it:

• Is established in the UK.
• Carries out a new qualifying trade.
• Is not trading on a recognised stock exchange at the time of the share issue.
• Has no arrangements to become a quoted company or a subsidiary of one during the time of the share issue.
• Does not control another company unless that company is a qualifying subsidiary.
• Has not been controlled by another company since the date your company become incorporated.

Your company and any of its subsidiaries must:

• Not have gross assets over £200,000 at the time when the shares are issued.
• Not be a member of a partnership agreement.
• Have less than 25 full-time equivalent employees in total at the time when the shares are issued.

What are the latest changes to SEIS?

As of 6 April 2023, there are several updates for SEIS:

• Individuals will be able to claim Income Tax and Capital Gains Tax re-investment reliefs on larger investment amounts, as the annual limits have now increased from £100,000 to £200,000. Investors can receive tax relief of up to £100,000 on eligible investments through the scheme.
• The age limit of a qualifying company’s “new qualifying trade” has increased from two to three years.
• The SEIS now allows qualifying companies that have been in business for a maximum of three years to be eligible, which is an extension from the previous restriction of two years.
• Qualifying companies can now raise up to £250,000 in SEIS investment. This has increased from £150,000.
• The limit at the date of share issue on a company’s “gross assets” increased from £200,000 to £350,000.

The SEIS plays an important role for start-ups in the UK, providing essential support to early-stage businesses while offering attractive tax incentives to individual investors.

If you are an investor seeking exciting new opportunities or a start-up in need of financial backing, SEIS could be the perfect solution to help you achieve your goals.

Are you considering applying for SEIS funding for your start-up? Get in touch today for more information.