In recent years, the UK government has implemented several tax relief programs to help support new startups. One such program is the Seed Enterprise Investment Scheme (SEIS). This valuable tax relief offers several advantages to entrepreneurs who are looking to raise capital for a new business.
What is the Seed Enterprise Investment Scheme?
The Seed Enterprise Investment Scheme (SEIS) is a government-backed initiative encouraging people to invest in early-stage and high-risk startups. The scheme was launched in April 2012 and was designed to help small businesses raise finance for their new projects.
Under the scheme, investors who make an investment in a qualified business can receive a 50% tax relief on their investment. Additionally, the investors that qualify for SEIS relief do not need to pay capital gains tax on any gains made from the investment.
Available Tax Reliefs of SEIS
- Income Tax Relief. SEIS investors are eligible for income tax relief of up to 50% of the original investment. This allows the investor to reduce their income tax rate by their investment amount.
- Capital Gains Tax Relief. Any gains made on the SEIS investment are not subject to capital gains tax, provided that the investment is held in the business for a minimum of three years.
- Gift Aid. Investors can receive additional tax relief on their SEIS investment through gift aid. This means that any donations made to the company through the SEIS are eligible for tax relief.
- Seed EIS Relief. Investors can claim further tax relief when investing in a ‘seed EIS’ company. This allows the investor to claim a 50% tax relief on the original investment amount plus any additional investments made into the company.
- Employee Shareholder Scheme Relief. Investors who take up shares in the company through an employee share scheme do not need to pay capital gains tax on any profits made from the shares.
- Inheritance Tax Relief. Investors can also claim inheritance tax relief on any gains made through the SEIS investment. This means that any profits made from the investment can be passed on to the investor’s beneficiary without incurring any inheritance tax.
Conclusion
The Seed Enterprise Investment Scheme is a great way for investors to benefit from tax relief when investing in startups. The scheme is designed to help small businesses raise finance and provides investors with several tax reliefs, including income tax relief, capital gains tax relief, and inheritance tax relief. By taking advantage of these tax reliefs, investors can greatly reduce the cost of their investment and ensure they receive a return on their investment.