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Seed Enterprise Investment Schemes: Your Guide to Tax Efficient Benefits

For small and startup companies in particular getting the funding they need to support growth and success is the key to building business for the long term.

The Seed Enterprise Investment Scheme (SEIS) is designed to help early stage organisations raise the finance they need to launch their business effectively. As well as the business support provided by experienced investors, SEIS investment also unlocks tax efficient advantages that would otherwise be out of reach to the average entrepreneur.

As an established venture capital provider, Mercia Fund Management helps early stage projects access funding in order to reach their potential. We have compiled an essential guide to SEIS tax relief, so you can understand how securing seed funding can assist you in your quest for business success.

Income Tax Relief

Income tax is a tax that both individuals and registered businesses have to pay on their earnings, and whilst there is a tax-free allowance for both parties, paying income tax can leave small and startup businesses feeling stretched.

SEIS investment offers that all-important relief on income tax with companies that receive seed funding able to gain relief of up to 50%. In addition to this, under the Seed Enterprise Investment Scheme companies can claim relief under the tax allowance from the previous year.

Capital Gains

As with the Enterprise Investment Scheme (EIS), those receiving funding via SEIS are also eligible for capital gains tax relief. In fact SEIS funded companies are entitled to exemption from capital gains tax if shares are sold and held for a minimum of three years. This relief is a particularly important for early stage companies that may not have the turnover and profit to fund growth, and capital gains relief ensures all business value growth is essentially tax exempt.

Dealing with Loss

Whilst every business owner will say that failure is simply not an option for their growing company, the recovering economic climate has been known to claim a few fatalities. No matter how strong your business model is and how passionate you are about your new venture, the economy can make it difficult for startup businesses to succeed. However, as well as offering tax relief on earnings and capital gains, seed enterprise schemes offer relief on losses.

Your Business Property

Shares in your company are also eligible for relief under SEIS investment. These shares however must be held for a minimum of two years and in most cases up to 100% relief in available for shares in SEIS companies.

For further information on SEIS and early stage investment, please visit our website.

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