SEIS and EIS, what is it and why does it matter?
If this is your first time raising funds for your startup, you need to know about SEIS and EIS. It’s a government tax scheme that enables friends & family, angel investors and others to support your business while minimising risk.
Why is this good? Well, it makes risky startups like yours much more attractive to invest in.
If you are looking for seed funding, read on to find out more about SEIS and EIS.
What is SEIS and EIS?
The Seed Enterprise Investment Scheme (SEIS) was launched in April 2012 targeted at startups and The Enterprise Investment Scheme (EIS), which has been in operation since 1994, is targeted at small unlisted businesses. Investors are given incentives through sizeable tax breaks, including income tax relief, no capital gains tax on the profits and no inheritance tax. On the EIS scheme, income tax relief stands at 30%, whereas SEIS offers a 50% tax relief. This means that if someone invests £10,000 into your business, they can knock £5,000 off their income tax bill for that year with SEIS.
How do you qualify for SEIS and EIS investment?
To qualify for SEIS funding, your startup must be in its first two years of operation, have no more than 25 members of staff, and maximum gross assets of £200,000. For EIS funding, the first EIS investment must be within the first seven years of operation, your private (unlisted) company can’t exceed 250 employees and maximum gross assets should not exceed £15 million.
Your company is able to obtain up to £150k of funds through SEIS scheme. Amounts beyond this must go through EIS, which you may be able to access as long as you have spent at least 70% of the SEIS funding you received.
What are the investor criteria?
When pitching to angel investors, highlight that you have confirmed SEIS or EIS eligibility HMRC, and ensure that they are aware of the stipulations that are carried with SEIS or EIS funding. An individual has an annual £100,000 SEIS allowance. They also can’t own more than 30% of your shares.
So, if you haven’t done so yet, we urge you confirm your SEIS or EIS eligibility with HMRC.
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