What is EIS and SEIS?
Whilst neither of these tax-relief schemes are new, with the Enterprise Investment Scheme (EIS) first introduced over two decades ago back in 1994 & Seed Enterprise Investment Scheme (SEIS) arriving on the scene in 2011, there remains a high-level of dubiety over both concepts. This guide will seek to provide some clarity on the tax-relief schemes available for both businesses and investors.
The EIS seeks to help smaller, higher-risk trading companies to raise finance. This is done through offering tax reliefs to investors purchasing shares in such companies, incentivising investors through a reduced capital risk. The tables below seek to provide a clearer overview of the tax benefits and qualifying criteria of both the EIS and SEIS.
The SEIS was implemented in a quest to facilitate raising equity finance for small, early-stage companies. The SEIS has been widely recognised as a complementary feature to the EIS with the difference being that the SEIS acknowledges those ‘very-early stage’ companies, with much lower qualifying criteria (as shown in Table 1). As with the EIS, the SEIS tax reliefs are offered to individual investors in such companies.
Qualifying Criteria for Businesses
|QUALIFYING CRITERIA DIFFERENCES||EIS||SEIS|
|Maximum Number of Employees||250||25|
|Maximum Gross Assets||£16M||£200,000|
|IHT||2 Years||2 Years|
|Minimum Investment Per Annum||£1m||£100,000|
|Minimum Amount Raised Per Company||£16m||£150,000|
Tax Benefits for Investors
|Income Tax Relief||30%||50%|
|1st Capital Gains Tax Relief||0% (However, 100% of the gain will be deferred for the life of the investment)||50%|
|2nd Capital Gains Tax Relief||100%||100%|
|Inheritance Tax Relief||100%||100%|
Changes to EIS investments from 6 April 2018
The Autumn Budget 2017 announced changes to EIS and Venture Capital Trusts investment, which will be legislated under the ‘Finance Bill 2017-18’, with the intention of encouraging more investments into knowledge-intensive companies.
The changes announced were as follows:
- Limits doubled from £1 million to £2 million on the amount an individual cna invest under the EIS in a tax year. With the provision that any amount over £1 million is invested in on or more knowledge-intensive company.
- Knowledge-intensive companies allowed to use the date when their annual turnover first exceeds £200,000 to determine the start of the initial investing period under the permitted maximum age rules, as opposed to the date of the first commercial sale.
- Annual investment limit raised from £5 million to £10 million for knowledge-intensive companies receiving investment from VCTs and under the EIS. The lifetime limit will stay at the £20 million limit.
NB: These changes will effect investments made on and after 1 December 2017.
Access the Equity Crowdfunding channel on OFF3R for a selection of EIS or SEIS eligible investments.