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Seed Enterprise Investment Scheme (SEIS)
About SEIS: The Seed Enterprise Investment Scheme (SEIS) was introduced in April 2012 by HMRC to help small, early-stage companies raise funds through individual investors by providing a series of tax reliefs on investments made into qualifying companies.
The Seed Enterprise Investment Scheme is structured to provide eligible investors who are tax resident in the UK, with the opportunity to obtain tax advantages available under the Seed Enterprise Investment Scheme (SEIS) legislation.
SEIS relief is available to investors in respect of each investment in an Investee Company, made under the investment mandate of either the Deepbridge Innovation SEIS or the Deepbridge Life Sciences SEIS, by reference to the date the investment is made. Under SEIS, the main tax advantages that may be claimed by a qualifying investor are as follows:
SEIS TAX RELIEFS AVAILABLE
Investors can, depending on their individual circumstances, enjoy some or all of the tax benefits available under the Seed Enterprise Investment Scheme. The following is a general summary of the main current tax advantages that may be available to an Investor under the Seed Enterprise Investment Scheme in respect of an investment made in an Investee Company during the tax year.
- 50% income tax relief up to a maximum investment in SEIS of £100,000 per tax year per individual.
- Capital gains made that are reinvested in SEIS shares qualify for a 50% exemption from CGT.
- Tax free gains. There is no capital gains tax liability on gains on the disposal of shares which have been held for 3 years in SEIS qualifying companies, on which SEIS income tax relief has been obtained.
- 100% inheritance tax exemption through the availability of Business Relief may be available after each individual investment has been held for at least 2 years.
- Income tax carry-back relief. Investors can claim income tax relief for the tax year in which they invest in the underlying companies, or the tax year immediately preceding the investment. This enables the investor to claim tax relief in the period(s) most advantageous to him/her.
- Loss relief. A loss on any qualifying investment in the portfolio, irrespective of the overall performance of the portfolio, can be offset by individuals against income of the tax year of loss, or the previous year, or against capital gains of the tax year of the loss and future years.
The above tax advantages can only be claimed when the investors funds have been deployed into a company, rather than when an investor makes an initial subscription. There is no limit to the amount of gains that can be deferred for CGT purposes.
The above does not constitute tax advice to any person: it is recommended that investors take independent, tax, legal and financial advice from a qualified professional adviser before considering an investment.
Please note that tax benefits depend on personal circumstances, are not guaranteed, and rely on UK Tax Legislation which may change in the future. Investments in unquoted companies carries high risks and investors could lose all funds invested. Investors should not invest if capital is required in the near term. No established market exists for the trading of shares in private companies, making it difficult to sell shares.
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Example SEIS Investment
Investee Company
x2 in value
Sum invested £50,000
Income Tax Relief £25,000
After holding shares for 5-7 years, you sell them for £100,000, owing nothing in capital gains tax.
Total gain to investor: £75,000 (£50,000 from the sales of shares, plus £25,000 from Income Tax Relief)
Total loss/gain
+£75,000
Investee Company
Same Value
Sum invested £50,000
Income Tax Relief £25,000
After holding shares for 5-7 years, you sell them for £50,000, owing nothing in capital gains tax.
Total gain to investor: £25,000 (£50,000 from the initial investment is returned, plus £25,000 from the Income Tax Relief)
Total loss/gain
+£25,000
Investee Company
Goes out of business
Sum invested £50,000
Income Tax Relief £25,000
After the company goes out of business your shares are worth £0.
The investor receives loss relief from the government, equal to your capital at risk. In this example the £50,000 invested - £25,000 in Income Tax Relief, multiplied by the percentage bracket you belong to (£50,000 - £25,000). At a 45% tax bracket, the loss relief will be £11,250 (45% of £25,000). So for £50,000 invested, your real loss is £25,000 - £11,250 = £13,750
Total loss/gain
-£13,750
The examples in this section are set out for illustrative purposes only and include tax reliefs within the forecast returns. They are not, and should not be construed as, forecasts or projections of likely performance. Past performance is not a guide to the future performance of an investment. The SEIS tax reliefs are not guaranteed, are dependent on personal circumstances and may be subject to change in future. They are also dependent on the investee company qualifying for SEIS relief and maintaining its SEIS status for the requisite 3 years.
