The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The seed enterprise investment scheme (SEIS) and enterprise investment scheme (EIS) are very similar schemes which offer substantial tax incentives to investors in companies which qualify. The tax incentives for SEIS and EIS investments are intended to encourage investment in high-risk, small, unquoted companies that may find it difficult to raise finance without the tax incentives being offered.
There are stringent conditions imposed upon companies wishing to qualify for the scheme. Tax advice on the schemes should be undertaken and supervised by a suitably experienced practitioner. Terms of engagement for SEIS and EIS work should be carefully drafted in particular because conditions are tested on an ongoing basis. Therefore, tax advisers should ensure that they limit their liability in respect of any future action taken by the company which could affect qualification for the schemes.
There are no particular tax reliefs available to the company. The tax reliefs are intended for the investor to incentivise investment in a high-risk, early stage company. The availability of tax relief, together with a solid business plan, is a strong draw for investors. Many investors are sophisticated serial investors.
SEIS focuses investment in very early stage, new businesses that may face particular difficulties in raising finance as they are seen as being very high-risk. EIS is also intended for small companies but they can be a little larger and a little older than those for which SEIS is intended. The schemes are very similar to facilitate seamless growth through financing being raised first through SEIS and then further follow on financing being raised through EIS.
The process in brief is that the company first meets the conditions required by the SEIS / EIS legislation to become a qualifying company and it then issues shares which also meet the stringent requirements to be qualifying shares. Advance assurance can be sought from HMRC before the share issue to gain comfort that the conditions will be met. The investor subscribes
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