Did You Know You Can Raise Capital For Your Company Through EIS and SEIS?

Published Friday, 25th June 2021
Idea 5208967 150

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) exist to promote investment into innovate companies, including startups. The UK government has developed these initiatives to help early-stage companies secure capital from business investors who are looking to make tax-efficient investments.

If your ‘high-risk’ company applies for one these schemes, the private investors are granted a substantial tax break. Tax relief is a great way to attract investors who might have initially turned a blind eye.

On that note, let’s explore some of the key questions surrounding SEIS and EIS.

What is the difference between and SEIS and EIS?

As the name ‘Seed Enterprise Investment Scheme’ suggests, SEIS is all about planting the seed for early-stage companies and startups. The government established this initiative in 2012 to support SMEs and promote as much UK-based investment as possible. Investors can put forward up to £100,000 in a tax year and obtain a 50% tax break in return. They will also benefit from a Capital Gains Tax exemption from any gains which arise from the sale of the shares after three years.

On the other hand, EIS targets medium-sized businesses that have already been trading between two and seven years. Investors can invest up to £1 million per tax year and will receive a 30% tax break in return. As with SEIS, the Capital Gains Tax exemption also applies with EIS.

What are the SEIS and EIS requirements?

There are several conditions that need to be met in order to qualify for one of these schemes. In summary, SEIS requirements include:

  • Being an established UK-based company that is not trading on a recognised stock exchange and has no intentions of doing so at the time the share is issued.
  • No direct control over other companies and vice versa. This includes not being a member of a partnership.
  • Gross assets of less than £200,000 and no more than 25 employees.

EIS requirements entail:

  • Being a UK-based company that participates in a qualifying trade, but is not trading on a recognised stock exchange.
  • Owning more than 50% of company shares, ensuring that another business is not in direct control.
  • Having no intentions of closing after completing a set amount of projects.
  • Having less than £15 million in gross assets and no more than 250 employees.

How does one apply for SEIS and EIS?

There’s often a bit of confusion when it comes to applying for these schemes. Is it the company’s responsibility or the investors responsibility? Ultimately, the company will have to submit the application.

Here are the 4 main steps:

  1. Apply for advance assurance: an optional application that assures you’re likely to be approved by HM Revenue & Customs (HMRC).
  2. Submit a Compliance Statement to HMRC: a document with extensive information about your business.
  3. Get authorised by HMRC.
  4. Send the compliance certificates to investors once the Compliance Statement has been approved.

EIS and SEIS play an important role in uplifting businesses across the UK. The schemes make it easier for companies to attract potential investors and ease the burden of trying to raise capital. It’s the confidence boost that many businesses are looking for in order to generate capital.

Explore our EIS/SEIS services further

Please get in touch and a member of our specialist team will be more than happy to help.

Get in touch

COPYRIGHT © 2021 CALDWELL PENN LIMITED   |   Company Reg Number: 03872209   |   ICAEW - Institute of Chartered Accountants in England and Wales: C005061064