03 May Who can use the SEIS tax scheme?
One of the most common questions we receive from businesses looking for investments are in regards of the Seed Enterprise Investment Scheme (SEIS) and in particular who is eligible for the scheme.
You can use the SEIS scheme if you are a company less than two years old or have been trading in a qualifying trade for less than two years. For any companies that are older than two years old or have been trading for longer than two years, you can instead use the big brother scheme called Enterprise Investment scheme (EIS). Please read more about the EIS scheme.
What type of business can use the SEIS scheme?
There are some restrictions in regards of the type of businesses that can use the SEIS scheme. Business may not qualify if more than 20% of your trade includes business activities like the one below:
- coal or steel production
- farming or market gardening
- leasing activities
- legal or financial services
- property development
- running a hotel
- running a nursing home
- generation of energy, such as electricity and heat
- production of gas or other fuel
- exporting electricity
- banking, insurance, debt or financing services
For support in establishing if your business is eligible make sure you talk to your accountant or an expert.
Other restrictions for using the SEIS tax scheme
The business needs to be based in the UK and needs to have a physical presence in the UK.
The business needs to be regarded as small and can only have less than 25 full-time employees and gross assets of no more than £200,000 at the time of the SEIS investment. Furthermore, the Company cannot be trading on any recognised stock exchange at the time of the investment.
Can you use the SEIS scheme if you belong to a group of companies?
You do need to look at the group structure to ensure you qualify for the SEIS scheme. A company that is controlling another company does not qualify unless the subsidiary is a qualifying subsidiary.
If the subsidiary is deemed to be a qualifying subsidiary you can therefore use the SEIS scheme. Any monies received through the scheme can then be distributed down to the trading entity. Groups structures can be complicated in regards of SEIS and EIS so ensure that you do speak to an expert before taking SEIS/EIS investment.
How much can you invest in the SEIS scheme?
In total the Company can receive up to £150,000 using the SEIS scheme thereafter you need to use the EIS scheme. An investor can only invest £100,000 in total per annum into SEIS schemes. That means that an investor can invest in more than one company’s SEIS scheme over a year but cannot exceed the £100,000 annual limit.
Can you use the SEIS scheme after using the EIS scheme?
No, if the Company has already received investment through the scheme, they cannot use the SEIS scheme thereafter. You always have to use the SEIS scheme before starting using the EIS scheme. However, if you receive more than £150,000 in your initial investment you can first use the SEIS scheme and thereafter use the EIS scheme for the remaining of the investment.
If you are looking to use the SEIS scheme or the EIS scheme, please contact Metric Accountants for more information.
FAQs about the SEIS Tax Scheme