The UK startup and early growth-stage company community now have access to more funding options than ever before.
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are government initiatives offering some of the most attractive tax breaks available in the UK.
Nyman Libson Paul, a member of The EIS Association (EISA), has been instrumental in EIS capital raises across a range of sectors and at every level from structuring, advising, obtaining advance assurances from HM Revenue and Customs, as well as facilitating the scheme and obtaining investors’ certificates.
Seed Enterprise Investment Scheme (SEIS)
This scheme is only available to small start-ups that have not been actively trading at any time two years before the shares are issued.
Investors who are also employees cannot benefit from SEIS, but existing or new directors in the company are eligible.
Providing the company has <50 employees, is unlisted, has gross assets of no more than £200k, and is carrying on a qualifying trade on a commercial basis, a UK tax-paying investor will be able to:
- Claim an income tax reduction equal to 50% of the money invested (subject to an annual investment limit of £100k);
- Pay no capital gains tax on any profits made from an SEIS investment; and
- Offset a loss against income tax providing they hold the shares for at least 3 years before selling them.
The company can only raise a maximum of £150,000 under the scheme and these funds must be used by the company in its qualifying activity within 3 years.
The shares must be ordinary shares which are paid up in full and in cash when they are issued.
Companies can only raise a maximum of £5 million in aggregate under SEIS.
Enterprise Investment Scheme (EIS)
Providing the company has <250 employees, is unlisted, has gross assets of no more than £15m and is carrying on a qualifying trade on a commercial basis, a UK tax-paying investor will be able to:
- Claim an income tax reduction equal to 30% of the money invested (subject to an annual investment limit of £1m);
- Defer CGT payments when the gain is reinvested in shares of an EIS qualifying company;
- Pay no capital gains tax on any profits made from an EIS investment; and
- Offset a loss against income tax providing they hold the shares for at least 3 years before selling them.
The shares must be ordinary shares which are paid up in full and in cash when they are issued.
Companies can only raise a maximum of £5 million in aggregate under SEIS.