SEIS offers tax breaks to investors into small start-up businesses.
For taking a risk, they can effectively buy shares half-price. It means higher potential returns, vital capital for businesses and a growing United Kingdom economy.
The Seed Enterprise Investment Scheme, also known as SEIS, aims to encourage investment in small and early stage companies by reducing the risk to investors of investing in these types of companies.
The Government introduced the SEIS as a way to promote new enterprise and boost economic growth in the UK.
The directors believe that the company will qualify under Seed Enterprise Investment Scheme (SEIS). Accordingly the directors intend to apply to HMRC for recognition as a SEIS company, so that outside investors in the company can obtain tax relief on their investment.
Relief is at 50% of the cost of the shares, to be set against the individual’s Income Tax liability for the tax year in which the investment was made.
Minimum Investment of £500 up to a maximum of £100,000. Relief is then given against the Income Tax liability of that preceding year rather than against the tax year in which those shares were acquired.
This is subject to the overriding limit for relief for each year.
In order to feel the full effects of SEIS, the investor must retain their investment in the company for 3 years. Individual investors, regardless of their marginal income tax, can receive initial income tax relief of 50% on investments up to £150,000.
INVEST IN FILM VIA SEED ENTERPRISE INVESTMENT SCHEMES
Jenny invests £30,000 in the tax year 2015-16 (6 April 2015 to 5 April 2016) in SEIS qualifying shares. The SEIS relief available is £15,000 (50%). Her tax liability for the year (before SEIS relief) is £50,000 which she can reduce to £35,000 as a result of her investment.
James invests £20,000 in the tax year 2015-16 in SEIS qualifying shares. The relief available is £10,000. However his tax liability for the year before SEIS relief (2013/2014) is £8,000. James can reduce his tax bill to zero as a result of his SEIS investment, but loses the rest of the relief available.