Start-up Investment capital – 50% tax breaks available!

Starting a business can be a big struggle financially. Banks are less interested in funding than ever, crowdfunding, like fundingcircle.com, generally needs 2 years accounts with £100K of turnover. Sometimes money from family, friends or other personal contacts is the only solution.

Did you know that if outside investors put money into share capital in the first couple of years they may get up to 50% of it back as tax relief from HMRC? Obviously there are rules and hoops to jump through but such generous tax relief might just help to attract investors – read on to find out about SEIS…

The Seed enterprise investment scheme (SEIS) is a government scheme that allows certain reliefs for investors who subscribe for shares in early stage companies. It is intended to complement the Enterprise Investment Scheme (EIS). The rules in many instances mirror those of the EIS.

The investor

Receives income tax relief of 50% of the cost of the shares regardless of their marginal rate. Relief is available provided the company meets the SEIS requirements. Investors do not need to be UK resident.

The relief is available for those with a shareholding that does not exceed 30% in such companies and can include directors investing in their companies. The relief is limited to £100,000 per investor, with unused annual amounts able to be carried back to the previous year.

Capital gains tax. There is no capital gains tax provided the shares have been held for at least three years. However, no capital gains tax relief applies if no claim to income tax relief is made.

The investor cannot control the company receiving the investment.

The company

This relief applies to smaller companies where there are 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business.

The business must be a UK company and have a permanent base in the UK.

The company has an overall maximum entitlement to SEIS investment of up to a total of £150,000.

The company has to trade in an approved sector – generally not in the financial services industry. All SEIS investments will, by definition, meet the requirements of EIS investments because SEIS is a subset of EIS.

If you think this might help you – get in touch with us and we’ll check whether your business and the potential investor qualify.

Margaret

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