What is a SEIS?
The Seed Enterprise Investment Scheme (SEIS), launched by the UK government in 2012, is designed to encourage investment in small, early-stage companies. By providing attractive tax reliefs, the scheme helps start-ups access vital funding. SEIS works alongside the Enterprise Investment Scheme (EIS) but targets even smaller and younger companies.
Key Features & Benefits
- Income Tax Relief: Investors can claim up to 50% income tax relief on investments up to £200,000 per tax year.
- Capital Gains Tax (CGT) Exemption: Profits made on the sale of SEIS shares are exempt from CGT if held for at least three years.
- Loss Relief: Investors can offset losses against their income tax or CGT liabilities if the investment fails.
- Capital Gains Reinvestment Relief: If an investor reinvests a gain from selling an asset into SEIS shares, 50% of the CGT on the original gain can be deferred.
- Inheritance Tax Relief: EIS shares may qualify for 100% relief from inheritance tax if held for two years and at the time of death.
Historical Context & Impact
Since its establishment, SEIS has become a crucial tool for supporting entrepreneurship in the UK. The scheme has facilitated investment in thousands of businesses, helping to stimulate innovation, job creation, and the growth of sectors such as technology and green energy.
Qualifying Companies
For companies to qualify as SEIS eligible investments, they must meet a strict set of criteria, ensuring they align with the objectives of the scheme. These criteria cover aspects such as the company’s size, age, trading status, and location. To learn more about the specific requirements, you can visit the
detailed guidelines provided by HMRC For a more detailed set of criteria, refer to the HMRC SEIS Guidance here.
FAQs
The Seed Enterprise Investment Scheme (SEIS) is a UK government initiative designed to help early-stage companies raise funds by offering tax reliefs to investors. SEIS encourages investment in small, high-risk businesses by providing generous tax incentives to investors who purchase shares in qualifying companies.
Investors in SEIS-qualifying companies can benefit from several tax reliefs:
- Income Tax Relief: You can claim 50% of the investment as a reduction in your income tax liability, up to a maximum investment of £200,000 per tax year.
- Capital Gains Tax (CGT) Exemption: If you hold the shares for at least three years, any gains made on the sale of the shares are free from CGT.
- Capital Gains Reinvestment Relief: If you reinvest a capital gain into an SEIS-qualifying company, up to 50% of that gain is exempt from CGT.
- Loss Relief: If the shares are disposed of at a loss, the loss can be set against your income tax or capital gains tax liability.
- Inheritance Tax Relief: SEIS shares are typically exempt from inheritance tax if held for two years and at the time of death.
To claim SEIS tax relief, you must:
- Obtain an SEIS3 certificate from the company you invested in.
- Complete the relevant section on your self-assessment tax return or send the SEIS3 certificate directly to HMRC.
- If claiming carry-back relief (applying the tax relief to the previous tax year), this must be indicated on your tax return.
SEIS investments carry several risks:
- High Risk of Loss: The companies involved are usually small and in the early stages of development, making them high-risk investments.
- Liquidity Risk: SEIS shares are not listed on any stock exchange, making them harder to sell compared to publicly traded shares.
- Investment Horizon: To benefit from the tax reliefs, you must hold the shares for a minimum of three years, which may limit flexibility.
Ready to learn more?
An introduction to VCTs
Venture Capital Trusts (VCTs) were introduced to encourage investment in smaller, high-risk companies by offering tax incentives to investors.
An introduction to EISs
The Enterprise Investment Scheme (EIS) was introduced by the UK government in 1994 to encourage investments in small, high-growth
potential companies by offering a range of tax reliefs to investors.
Live Opportunities
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