FAQ - Seed Enterprise Investment Scheme

FAQ – Seed Enterprise Investment Scheme (SEIS)

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What is SEIS?

SEIS is designed to help your company raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in your company.

What can you claim?

You can receive a maximum of £150,000 through SEIS investments on which your investors can claim relief. An can claim an income tax reduction equal to 50% of the money subscribed within the limit of £100,000.

Who is eligible?

These rules must be followed for at least 3 years or tax reliefs will be withdrawn. The business…

  • carries out a new qualifying trade;
  • which is established in the UK;
  • is an unquoted company and doesn’t plan to become one at the time of the issuance;
  • its gross assets is no more than £200,000;
  • it does not control another company except a qualifying subsidiary;
  • is not member of a partnership neither any of its subsidiary;
  • is not controlled by another company – Finance Act 3013 introduce the shelf companies exception;
  • has less than 25 full-time equivalent employees at the time of the issuance;
  • does not receive investment through the Enterprise Investment Scheme or from a venture capital trust; and
  • the money raised from the investment must be spent on the qualifying business activity within 3 years from share issue.
  • the company have any investment subject to EIS or VCT scheme before the issuing.
Who is not eligible?

Investors must not hold directly or indirectly more than 30% of the company’s ordinary share capital, issued share capital or voting rights. Investors who are     employee cannot benefit neither. But, existing or new directors are eligible. Even if the company fulfills all the requirements it will not be eligible if the investment is not undertaken for genuine commercial reasons and not with a main purpose of avoiding tax.

What is the application process?
  • Advance assurance

This enables you to ask HM Revenue and Customs (HMRC) if this investment might qualify for the SEIS. You can apply if you are the company secretary, the director, or the authorised agent. Send the form to:

Small Company Enterprise Centre

(Admin team)

Mid-size Business S0777

Newcastle

NE98 1ZZ

If your application is approved, you will receive a statement saying the investment is likely to qualify. However, you still need to complete a formal application called a compliance certificate.

  • Compliance Statement form- Company

WHAT is the Compliance Statement form?

This form is used by the company invested in to certify that certain conditions of the scheme are satisfied.

WHEN should you submit the Compliance Statement form?

The form cannot be submitted unless:

– At least 70% of money raised by the relevant share issue has been spent for the purposes of the qualifying business activity for which it was raised; and

– The new qualifying trade which constitutes the qualifying business activity or to which that activity relates has been carried on by the company issuing the shares or a qualifying 90% subsidiary of that company for at least 4 months.

If they decide the investment doesn’t meet SEIS requirements, you can review and appeal the decision.

WHICH forms? The Compliance Statement Form

HOW do you fill it out? You must complete a separate application for each share issue. Here is the guidance for properly completing the form. Then the Company should send the compliance certificate received from HM to its investors.

  • Which other document do you need ?
    • A cover letter
    • Articles of Association
    • Business plan
    • The Accounts
    • Your tax reference number
    • Shareholders agreement
    • The SEIS advance assurance form if you have applied to it
    • The detailed amount which would be raised
    • Detail the purpose of these monies
    • Description of any minimis aids received
  • Tax Return – Investors

Investors who normally complete a Tax Return Form.

You need to claim the relief on your Tax Return form by completing the Additional Information Section. In Box No 2 on Page 2 you need to enter the total value of the investment upon which you are claiming relief. In the large box on Page 4 of the Additional Information Section you need to provide details of the name of the company invested in, the amount invested, the date of issue of the shares and the name and reference number of the HMRC office issuing the tax certificate. Additional Information is provided in case you need extra resources.

Investors who normally do not complete a Tax Return Form

You need to complete the blank sections on Pages 3 and 4 of the SEIS Certificate. Detach Pages 3 and 4 of the SEIS certificate and send it to the HMRC office that deals with your tax deductions.

Enterprise Investment Scheme: Compliance Statement form- Company

What is the Form EIS 1?

This form is used by the company invested in to certify that certain conditions of the scheme are satisfied.

When should the Form be submitted?

After having carried out a qualifying business activity for 4 months unless the company has commenced winding up. It must be submitted within 2 years of this date, or within 2 years of the end of the tax year in which shares were issued.

Which Form?

The EIS 1 Form

*If your investment was made through an approved investment fund, the company will issue form EIS3 to the fund manager instead, and you will receive form EIS5.

Then the Company should send the compliance certificate EIS3 received from HM to its investors.

Tax Return – Investors
  •   Investors who normally complete a Tax Return Form

You need to claim the relief on your Tax Return form by completing the Additional Information Section. In Box No 2 on Page 2 you need to enter the total value of the investment upon which you are claiming relief. In the large box on Page 4 of the Additional Information Section you need to provide details of the name of the company invested in, the amount invested, the date of issue of the shares and the name and reference number of the HMRC office issuing the tax certificate.

The Additional Information page is available in case you need extra resources.

  •   Investors who normally do not complete a Tax Return Form

You need to complete the blank sections on Pages 3 and 4 of the EIS Certificate. Detach Pages 3 and 4 of the EIS certificate and send it to the HMRC office that deals with your tax deductions.

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