Expansion of the Seed EIS scheme

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Expansion of the Seed EIS scheme

The Seed Enterprise Investment Scheme (Seed EIS) provides very generous tax breaks for investors, including a 50% income tax reduction for the amount invested and exemption from tax on capital gains on disposal of qualifying shares, if they are held for a minimum of three years. In addition, there is a 50% capital gains tax exemption where gains on other assets are invested in Seed EIS shares. These reliefs make it easier for very small companies to raise external finance in their early years.

From 6 April 2023, the annual investment limit for individual investors increased from £100,000 to £200,000, potentially enabling twice as much tax relief as previously. Also from that date, the amount that a company can raise through the Seed EIS has increased by two-thirds, from £150,000 to £250,000. The base of the scheme has also been broadened, enabling more companies to use it. The gross asset limit has increased from £200,000 to £350,000 and the age limit on a qualifying trade has been extended from two to three years.

Note, however, that there are many types of trade excluded from this scheme. These include property development, providing legal or accountancy services, operating or managing hotels or care homes, farming and market gardening. If your company is looking to raise SEIS finance, or you are thinking of investing in such a company, please discuss your ideas with us, as the qualifying conditions for a successful issue of such shares are notoriously detailed and complex. We can advise on the tax issues, but you should take suitable financial advice from a qualified advisor before investing, as such small companies are very risky investments.