Seed enterprise investment scheme ― scheme criteria

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Seed enterprise investment scheme ― scheme criteria
  • Scheme criteria
  • SEIS criteria relating to the investor
  • SEIS criteria relating to shares
  • SEIS criteria relating to the issuing company
  • At the time of issue
  • During period B
  • During period A
  • Qualifying activities
  • New qualifying trade
  • More...

Seed enterprise investment scheme ― scheme criteria

The seed enterprise investment scheme (SEIS), like the enterprise investment scheme (EIS), is designed to encourage individuals to invest money in shares issued by qualifying unquoted companies though it is specifically aimed at very small companies which have only recently begun to carry on aqualifying trade, see the Seed enterprise investment scheme (SEIS) ― introduction guidance note.

HMRC’s guidance is at VCM30000 onwards.

Scheme criteria

To be eligible for relief, the scheme imposes conditions for the investor and the company, and has anumber of general requirements.

These apply to two particular periods in relation to the incorporation of the company and the issue of shares. These are referred to in the legislation as periods A and B.

Period A runs from the date of incorporation to three years after the issue of SEIS shares.

Period B runs from the date of issue of SEIS shares to three years after.

See the Summary ― Seed enterprise investment scheme ― overview of conditions for atable summarising the conditions in relation to these period.

SEIS criteria relating to the investor

To be aqualifying investor, all the following conditions need to be met:

  1. during period B, the investor(nor an associate) is not an employee of the company, though directors are not employees for this purpose

  2. during period A, the investor does not have asubstantial interest in the company

  3. during period A, the investor (nor an associate) does not receive aloan as aresult of the investment

For these purposes, asubstantial interest is an effective 30% holding of the ordinary share capital, issued share capital, voting power of the company or a51% subsidiary. Effective holdings include those which the investor enjoys as aresult of holdings through companies.

In addition to this, there are two further general conditions for the investor that:

  1. the investor does not subscribe for shares as part of an arrangement where another person subscribes for shares in acompany in which the

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