EIS, SEIS & SITR: Thinking Of Investing In A Business?
You could get a tax refund ...
If you invest in a business that qualifies for Enterprise Investment Scheme (EIS) or even better, for Seed Enterprise Investment Scheme (SEIS) relief, then you can claim tax relief ...
Making an investment via EIS, SEIS & SITR can get you up to 50% tax relief on your investment!
Lots of people have or will invest in a business. Did you know you could you have claimed as much as 50% of your investment as a tax refund?
"Wow, yes up to 50% of your investment! The tax relief is that good!"
Both tax reliefs are very similar in nature and have some lovely advantages. The tax break is worth 50% of their investment to SEIS investors and 30% for EIS investors. Social enterprises also get a look in with Social Investment Tax Relief (SITR) at 30% of your investment.
These tax reliefs have been around for some time but SEIS is due to be phased out and the scheme will come to an end on 5 April 2017, in just over 3 months’ time! Similarly, SITR is due to end but not until 5 April 2019. In other words, use the tax relief or run out of time.
"If you are thinking of investing in an unquoted company, then do it now before the SEIS relief gets taken away!"
And what does claiming the relief involve? Well, as you would expect, it can get a bit complicated. It is standard practice to request an advance assurance from HMRC as in, we give details to HMRC and they come back and say "yes the investments will qualify" or "no it won’t".
The great advantage of this is that your investors might put a bit more in, if they know in advance that the taxman will repay some of their investment!
Then when the investors make the investment, and the company starts spending it, we apply for the tax relief itself and once granted we can issue a form to the individual shareholders.
There are a few criteria for SEIS and if you think we can meet them, I recommend that this is something we organise on your behalf.
Any individual invests less than £100k (across all their SEIS investments)
The company raises less than £150k from SEIS investors
No SEIS investor has more than 30% of the shares
The investment is for new shares (note you can pay more than face value for the shares)
For SEIS the investment has to be made before 5/4/2017
At least 70% of the money has to be spent by the company on the business – ie for the purpose of the qualifying activity
The company has less than 25 employees
The company is based on the UK
The company is independent (ie not a part of another business)
The company is not quoted on a stock market
The company has a qualifying trade (there are criteria to determine this)
If you are an investor, good luck with your investment and remember to ask about the possibility of SEIS before you pay your money! If you are an entrepreneur looking for investment, then can SEIS relief help you to be more attractive to your potential investors?
The criteria for EIS and for SITR are slightly different, so get do in touch with us on 0333 335 0422 if you would like to find out more or if you would like some help organising this tax relief!
Until next time ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.