Is Your Business Eligible For The Seed Enterprise Investment Scheme Tax Relief?

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We are frequently questioned about which businesses are eligible for SEIS aka Seed Enterprise Investment Scheme. Through this post, we have presented a quick summary of the prerequisites.

Each business must originally (i.e. at the time of a matter of the stakes) not be documented on a recognised stock exchange (as described for the pursuits of SEIS Relief). There must be no “agreements” in the niche to be documented. In addition, throughout the three year SEIS term, it must not be a subsidiary of or be managed by another business. It must either exist to take on a qualifying business or be the parent organisation of a trading group. 

A trading party is a party in which, directly or indirectly, more than 50% of the stakes of each subordinate are owned by another associate of the party. Regardless, any subordinate utilising any of the capital presented by the matter of stakes must be a qualifying 90% subsidiary. Non-eligible business actions (considerably, investment activities and non-qualifying businesses) must not incorporate a significant part of the party’s business as a whole. The eligible business activities for which the matter of stakes presents the capital must be a business run on a commercial ground and with a thought to profit realisation.

However, it is conceivable for entitling activities to be taken on anywhere globally. The business that allocates the stakes must have a “permanent facility” (considerably, a taxable existence) in the United Kingdom.

For SEIS objectives, the importance of the gross investments of the business and any subsidiaries must not overreach £200,000 instantly before the matter of stakes. Subject to specific peculiarities, the ultimate Seed Enterprise Investment fundraising per business is limited to an all-time max of £150,000. The company’s highest number of full-time employees at the acquisition time is confined to fewer than 25.

A business is not eligible for SEIS relief if it has formerly allocated stakes on which EIS Relief has been claimed or has given stakes to or acquired an asset from a venture capital trust. If a business issues stakes on which SEIS Relief is claimed, it can allocate the following stakes on which EIS Relief may be appropriated.

Most classifications of businesses are authorising trades for SEIS pursuits, but the following are not on the list:

  • Trading in land, entities, shares, deposits or other financial tools
  • dealing in goods otherwise than in the class of an everyday business of retail or wholesale distribution
  • insurance, banking, money lending, and debt factoring;
  • charter investment financing or other monetary activities;
  • leasing, excluding specific lettings of ships, or obtaining royalties or franchise fees (subject to particular exceptions, most likely regarding a self-generated intellectual property)
  • offering lawful or accountancy assistance;
  • agriculture and market gardening;
  • holding, operating or inhabiting forestry or woodlands for timber production;
  • real estate development;
  • shipbuilding;
  • delivering steel and coal
  • owning and managing hotels or similar facilities;
  • running or operating nursing and residential care facilities. 
  • production of gas or fuel; and
  • generation or export of power

The business’s trade must typically be atleast two years old at the time of the investment. Businesses “in ordeal” cannot acquire the privilege of Seed Enterprise Investment. In the rule, HMRC acknowledges that a business will not be treated as “in ordeal” within three years of its establishment or if it can expand capital from existing markets or stakeholders. 

Stakes only qualify for SEIS relief if they are common stakes, not holding any present or prospective preferential privilege to gratuities during the SEIS period (three years). Apparently, the same applies when a business does not hold any trade’s assets on its winding up or any present or prospective privilege to be redeemed.

An investor can receive Seed Enterprise Investment Scheme tax relief exclusively in the tax year in which acquisitions in eligible SEIS companies are made or in the immediately preceding tax year.

Got any questions? Feel free to leave them in the comments section below.

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