The Seed Enterprise Investment Scheme (SEIS) is a UK government initiative designed to help new, high-risk companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. It's recognized as one of the most tax-efficient investment schemes available in the UK, alongside others like the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCTs), Social Investment Tax Relief (SITR), Community Investment Tax Relief (CITR), and Individual Savings Accounts (ISAs).
Investors in SEIS-eligible businesses can enjoy a range of tax reliefs, making it an attractive investment option. These reliefs include:
- Income Tax Relief: Investors can claim back 50% of the cost of their investment in the form of a reduction to their Income Tax liability, applicable on investments up to £100,000 per tax year. This relief can be claimed as soon as the next tax year following the investment.
- Capital Gains Tax Relief: No Capital Gains Tax is due on profits from the sale of shares if the shares are held for at least 3 years.
- Loss Relief: If the invested startup fails, investors can claim relief on their loss, set against either their Capital Gains Tax or their Income Tax bill, depending on which is most beneficial.
The maximum investment amount eligible for SEIS reliefs in a tax year is £100,000. This cap ensures that the scheme supports investment in new businesses without allowing excessive tax advantages.
To claim these tax reliefs, investors must file a Self Assessment tax return and claim their Income Tax relief first. Filing this claim is crucial as it's a prerequisite for eligibility for the other reliefs provided by the SEIS. This requirement emphasizes the importance of understanding and complying with tax obligations when engaging in SEIS investments.
