Small Business Tax Advice: The Chancellor Announces That The Seed Enterprise Investment Scheme Is Here To Stay.

What did you make of the Budget?

Well, if you’re a beer-drinking, bingo-playing 50 or 60-something, you’re probably quite happy with what Chancellor George Osborne dished up last week. If you’re young and unemployed then perhaps there was little cheer in the Chancellor’s message. But what was in the Budget for small businesses and entrepreneurs? What measures were introduced or re-enforced that could make a significant difference over the coming years? Well, as accountants one of the things that really caught our eyes was the announcement that the Seed Enterprise Investment Scheme (SEIS), which offers tax efficient benefits to individuals whilst encouraging investment in small and early-stage start-up businesses in the UK, has been made a permanent fixture. From an accountant’s perspective that’s good news indeed.

So what exactly did the Chancellor say? Well, Mr Osborne confirmed that the ongoing success of the SEIS programme and the promotion of new enterprise and entrepreneurship has helped the government come to the conclusion that the implementation of SEIS should be adopted as a long term option – it had originally been due to expire on 5th April 2017. Mr Osborne told the Commons:

“Two years ago, I launched the Seed Enterprise Investment Scheme to help finance start-ups. It’s been a great success and I’m making it permanent. We’re also backing investment into social enterprises with a Social Investment Tax Relief at a rate of 30 per cent.”

So what exactly is the Seed Enterprise Allowance Scheme?

Well, the SEIS encourage investment in new companies and start-ups and offers income tax and capital gains tax relief on investments made by smaller companies. The main aspects of the scheme to date are as follows:

  • SEIS investors can invest £100,000 in a single tax year which can be spread over numerous companies. Individual companies can raise no more than £150,000 through SEIS investment (this is in total and NOT an annual threshold).
  • SEIS investors qualify for income tax and capital gains tax relief for subscribing in cash for qualifying shares in qualifying UK start-ups. Qualifying shares includes ordinary shares, but also shares that may have certain non-cumulative preferential dividend rights.
  • Investors can receive up to 50% tax relief in the tax year the investment is made.
  • Where income tax relief is available for an investment into SEIS shares, generally any capital gain realised on a disposal of the shares will be exempt from tax.
  • The company must have assets of less than £200,000 in order to be eligible for investment.
  • There is a huge amount of anti-avoidance legislation to prevent exploitation for tax avoidance purposes.

This new relief brings social enterprises in line with enterprise investment schemes and venture capital trusts, allowing eligible social enterprises to receive a maximum of around £290,000 investment over a three-year period.
If you would like to minimise your CGT liabilities, or are looking for expert advice on EIS, SEIS or EMI, then contact Steven Glicher accountants on 0161 485 8007.

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