SEIS Tax Relief

A tax break to help start-up companies

Do you need to raise capital for your start-up?

If your company is a start-up and you’re looking to raise money for your business, it can be tough to convince would-be investors to provide the necessary finance.

This is because your company has little (if any) trading history, few assets to offer as collateral and a higher degree of uncertainty.

Fortunately there is a tax break called the Seed Enterprise Investment Scheme (SEIS) designed to incentivise potential.

How your start-up can benefit

A company may issue shares for a cash investment of up to £150,000 under the SEIS scheme, which it may use for a wide range of business purposes, everything from research and development to recruitment of more staff.

There are some rules around what type of company qualifies for SEIS investment. While there is no guaranteed way to make sure an investment will be eligible for the SEIS, companies can apply to HMRC for SEIS ‘advance assurance’. That assurance gives a provisional indication of whether or not a company may be eligible to apply for tax relief for its investors.

HMRC simply requires that all the monies raised by the share issue must be spent on qualifying business activity (growth activities) within three years of the share issue.

The benefits for the investor of investing via the SEIS scheme are equally clear.

The SEIS offers attractive tax reliefs to potential investors (including Angel investors).

As with EIS, there’s no capital gains tax to pay on profits, no inheritance tax, and you can claim loss relief in the same way. See above for details.

The principal two types of tax relief are described here.

What Our Clients Say

We’ve been working with Metric for several years now and through that time have received a great many suggestions, recommendations and counselling that have brought multiple economic benefits to our business.

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Brendan O’Toole, CEO

How to qualify for SEIS

There are many “trip-wires” that the company seeking investment (and its directors) must avoid in order to qualify for SEIS.

Here are some of the more obvious ones.

  • A company cannot receive more than £150,000 in total under the scheme.

  • The equity investment must be for ordinary shares in the company.

  • The company must be in a “qualifying” industry.

  • It must have no more than £200,000 in gross assets.
  • Any trade being carried on by the company at the date of issue of the shares must be less than 2 years old.
  • It must have fewer than 25 employees.
  • The company must not have received investment from a Venture Capital Trust or under the EIS tax scheme.
  • The company must be unquoted at the time of issue of the shares.

What happens after your seed Investment?

Under the SEIS-incentive scheme you can only raise £150,000.

This is regarded as a “seed” investment.

Many businesses will need to raise much more investment to take their company through the development stage and a market launch.

There is an extra relief called capital gains reinvestment relief. This is useful to you if you have recently paid capital gains tax on other investments. You can reclaim up to 50 per cent of the tax paid if you reinvest that money into SEIS.

For these investments you will need to use another scheme similar to the SEIS-scheme, the Enterprise Investment Scheme – EIS.

4 reasons you need our expertise

Here’s why your company needs an expert, rather than a “high street” accountant if it is planning to raise equity finance via EIS:

The tax rules are complicated

In order for an investor to qualify for SEIS and enjoy the significant tax advantages, both the company and the investor must meet various criteria. If you fail on a technicality, your investors will not be impressed.

Understand the deal

Whenever a business raises finance it is entering into a long-term commitment. But what exactly have both parties committed to undertake and for how long? These are questions that need to be fully answered by a professional who understands your business and its needs.

It’s not just about the cash

Are you hoping that the investor will also bring their strategic knowledge and business acumen as well as their cash? Does your investor want to be consulted (or vote) on management’s decisions? These are points that we regularly advise on and need to be thought through carefully by management in order to avoid problems later down the line.

Is equity finance the right option?

Whilst raising funds by issuing shares has many benefits compared to alternative sources of finance, it may not be best for your business. This will very much depend on your ambitions and requirements. A specialist will be able to talk you through the options and help identify what’s right for your business.

What makes us different

Remember, we only work with ambitious, technology companies and scalable businesses growing at least 25% per annum (either in terms of revenue or employees). This means that we are perfectly placed to help with your EIS application process, and beyond.

What’s more, as we are a chartered accountancy firm, registered with the Institute of Chartered Accountants in England and Wales, you can have faith that we not only have knowledge and experience of your ever-changing business sector, but financial acumen as well.

We also operate on a fair, transparent, fixed fee basis, which avoids problems later on.

What does it involve?

We provide a complete SEIS service, which includes completion of all of the steps set out below.

Advance assurance

We’d recommend that the initial step is to seek advance assurance. Whilst not required, it’s sensible for any company that intends to issue SEIS-compliant shares to obtain advance assurance from HMRC. This process can take circa two months but does provide comfort to the would-be shareholders that any investment would qualify for SEIS.

Share issue approval

Once a company is ready to issue new shares, the company directors must first ensure that they are legally able to do so. If a company wishes to legally issue new shares, the directors must ensure that the Articles of Association allow the directors to issue new shares without the need to first pass a resolution. If necessary, a meeting should be held to seek approval for the proposed share issuance.

Issue shares

Once the directors have the necessary authority, the cash investment should be received and the shares should be issued. Share certificates should be issued to the various shareholders and the share issue should be recorded at the Registrar (Companies House) on the SH01 form(s).

Apply for SEIS

After the company has been trading for 4 months or spent 70% of the “SEIS funds”, the company directors may submit a SEIS1 (or compliance statement) to HMRC and seek SEIS certification on behalf of the investors. Once the certificates are received, these are completed and issued to the investors.

Members Of

Great firm. With been with them for over 3 years now, since the day we created the Company. Throughout they’ve been amazing.

Ed Challis, Reinfer Ltd

I approached Metric to help us set up our first business. As a start-up it’s difficult to know what to do, where to go and who to trust. Years later, we are still using Metric and class them as an integral part of our business. They are a trusted adviser and I would highly recommend their services.

Gavin Shay , Equipsme Group

Metric Accountants has been supporting the Company for the past few years. The team is very competent and understands the requirements of a tech business well. They will take all the SEIS/EIS/VAT/R&D/accounts issues off your mind so that you can focus on running your own business. They are also just lovely people to work with. I could not recommend more.

Bartosz Jaskula, Mergerlinks Ltd

Excellent, helpful, friendly and professional with competitive fees. Would highly recommend!

Neil Terry, Vidsy Media Group

Metric are fabulous business partners. They are a true extension of the team. Beyond a great service, they are true advisors.

Katie Vanneck-Smith, Tortoise Media Ltd

Metric Accountants have supported us from the founding of our company, helping us through several years of growth. They’re always available at the end of the phone and represent really excellent value for money. Choosing Metric was one of the best decisions I made!

Kat Bruce, Nature Metrics Ltd