Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is one of 4 venture capital schemes to raise money for your company.

How the scheme works

SEIS is designed to help your company raise money when it is starting to trade. The scheme offers tax reliefs to investors who buy shares in your company. The company can receive a maximum of £150,000 through SEIS investments. This will:

include any other de minimis state aid received in the 3 years up to and including the date of the investment
count towards any limits for later investments through other venture capital schemes

Your company must follow various rules so your investors can claim and keep SEIS tax reliefs relating to their shares.

HMRC can withdraw tax reliefs from your investors if your company does not follow the rules for at least 3 years after the investment is made.

Companies that can use the scheme

Your company can use the scheme if it:

carries out a new qualifying trade
is established in the UK
is not trading on a recognised stock exchangeat the time of the share issue
has no arrangements to become a quoted company or a subsidiary of one at the time of the share issue
does not control another company unless that company is a qualifying subsidiary
has not been controlled by another company since the date of your company being incorporated

Your company and any of its subsidiaries must:

not have gross assets over £200,000 when the shares are issued
not be a member of a partnership
have less than 25 full-time equivalent employees in total when the shares are issued

If you have received investment through the Enterprise Investment Scheme (EIS) or from a venture capital trust, you cannot use SEIS.

About the investment

The shares you issue must meet the same requirements as shares issued under EIS.

The money you raise from the investment must be spent within 3 years of the share issue. You must spend the money on either:

a qualifying trade

preparing to carry out a qualifying trade
research and development that is expected to lead to a qualifying trade

You cannot use the investment to buy shares, unless the shares are in a qualifying 90% subsidiary that uses the money for a qualifying business activity.

Before raising your money

You can ask HMRC if your share issue is likely to qualify before you go ahead, this is called advance assurance.

How to apply

When you’ve issued your shares, you must complete a compliance statement (SEIS1) and send it to HMRC.

If you have got advance assurance, provide copies of any documents that have changed since HMRC gave you advance assurance.

If you have not got advance assurance, you must provide the following information for your company and its subsidiaries:

the business plan and financial forecasts
a copy of the latest accounts
an explanation of how you meet the risk to capital condition
details of all trading and activities to be carried out, and how much you expect to spend on each activity
an up to date copy of the memorandum and articles of association
the information memorandum, prospectus or other documents used to explain the fundraising proposal to your investors
details of any other agreements between your company and the shareholder
a list of the amounts, dates, and venture capital schemes under which you’ve previously received investment
any other documents to show you meet the qualifying conditions

You can only submit your compliance statement when you’ve:

carried out your qualifying business activity for 4 months
spent at least 70% of the amount raised by the relevant share issue

You must complete a separate application for each share issue.

What happens next

If your application is successful, HMRC will send you a letter and compliance certificates (form SEIS3) to issue to your investors.

The letter will include a unique investment reference number. You must include this on the compliance statements you issue to your investors. Investors need the compliance certificate and reference number to be able to claim tax relief.

For more information please contact us on 01702 345 207 or email us at info@arb.accountants