EIS and SEIS

More about EIS and SEIS

For many start up businesses, raising finance to start new trading activities is vital. Attracting investors to invest in what may be a risky venture can be challenging and that is why reliefs such as the EIS and SEIS can be extremely valuable. EIS was established in 1993 and SEIS was introduced in 2012 in order to incentivise smaller start-up businesses who wish to raise funds of up to £150,000.

Like many valuable reliefs, there are conditions which have to be met in order to secure the necessary tax reliefs. The tax rules are complicated, detailed, and as can be anticipated, strictly interpreted and enforced by HMRC.

Here at ETC Tax, we are well versed in helping clients navigate through these rules. We can assist potentially eligible companies in obtaining the necessary assurances that any investment received may qualify for EIS/SEIS and continually ensure that this is case. Furthermore, we can also structure investments so that individuals may maximise their individual reliefs.

It is worth highlighting some of the common potential pitfalls which, with some careful consideration at the outset, can be avoided, ensuring that relief is not lost.

• An investor should not be connected with the company two years before and three years after the issue of the shares.
• The shares must be fully paid up at the time they are issued and be subscribed for wholly for cash with no preferential rights.
• The money raised must be used, within given timescales, for the purposes of the qualifying business activity.
• The trade must be a qualifying trade conducted on a commercial basis with a view to profit. It must not involve to a substantial extent the carrying on of excluded activities, as set out in the legislation.