Seed Enterprise Investment Scheme (SEIS)
Q: How do I register my company for the scheme?
A: There isn't a registration process as such. The company issues the shares, and then applies to HM Revenue & Customs (HMRC) for approval. Once approved, HMRC will give it claim forms for its investors so that they can claim their tax relief.
HMRC also offers an advance assurance facility, which allows companies to check in advance of an issue of shares whether the company is likely to meet the qualifying conditions or not.
Q: Does the company need to be incorporated before applying for Advance
A: Yes, we will not consider a case where the company is not incorporated
Q: Does the company need to be registered for Corporation Tax?
A: No, not for the Advance Assurance. You should follow the normal steps to register for Corporation Tax.
Q: Is there a cost for the Advance Assurance?
A: HMRC does not charge for the Advance Assurance facility.
Q: Do I have to apply for Advance Assurance before I can get investment
for my company?
A: No, you don't. You may want to discuss with your investors whether to do so or not.
Q: I have already issued the shares can I still apply for an Advance
A: No, you can only apply for an Advance Assurance before the shares have been issued.
Note: If the email and attachments are greater than 10Mb you will need to send it on more than one email.
Q: My company has already issued shares to investors. What do we do now?
A: The company should complete a form SEIS1 and send it to HMRC.
Q: Can I email the SEIS1?
A: No, as we require an original signature.
Q: Do only companies qualify, or would my partnership also be eligible?
A: No, the scheme is for equity (share capital) investment for companies only.
Q: So people who lend money to my company won't
get tax relief?
A: No, they won't.
Q: Does the company have to be less than two years old to qualify?
A: No. That would be too restrictive and would disadvantage some companies which happened to have been dormant for a period. The two year age limit applies to any trade which the company is carrying on at the time it issues its shares to investors, or which it intends to carry on. The trade must be no more than two years old at date of issue of the shares, including any period when it was previously carried on by someone other than the company and then transferred to the company. And the company mustn't have carried on any other trade before the new qualifying SEIS trade.
Q: Does the company have to be trading in order to qualify?
A: No. But if it hasn't started trading, the monies raised by the share issue must by used for research and development (R&D) leading to a qualifying trade, or in preparation for a qualifying trade which the company intends to start.
Q: Is there a time limit within which the company has to start its trade?
A: No. But it must have spent all of the money it raised from the share issue within three years of the share issue, on R&D or preparatory activities intended to lead to a qualifying trade.
Q: My company has already had EIS/VCT investment. Can I now offer investors
A: No. Companies which have already had EIS or VCT investment won't qualify for SEIS. SEIS is to help very early stage companies which would otherwise struggle to raise money even under EIS.
Q: My company hasn't issued any shares yet,
but we got EIS advance assurance a while ago. Does that prevent us
from issuing shares under SEIS rather than under EIS?
A: No. But before you issue the shares you might want to double check with HMRC's Small Companies Enterprise Centre which gave you the assurance that the company will definitely qualify under SEIS as well as under EIS.
Q: Can friends and relatives get tax relief for investing in my business?
A: It depends. An investor doesn't qualify if he or she has more than a 30 per cent holding in the company. That 30 per cent is calculated by taking account of any holdings of associates of the investor. For this purpose, that includes spouses, parents, grandparents, children, grandchildren but not siblings, cousins, aunts, uncles. It also includes fellow partners in another business. So if you already own most or all of the company, then your wife or mum wouldn't be able to get tax relief for investing, but your brother could. There's no restriction for friends.
Q: What trades qualify?
A: Most trades qualify, but some don't - mostly those which are lower risk, asset backed or prohibited by EU rules.
Q: Is the £150,000 an annual limit or is that
the total amount my company can raise?
A: £150,000 is the total amount the company raise.
Q: What if my company needs more than £150,000?
A: Don't forget the longer-established Enterprise Investment Scheme (EIS). If you need more than £150,000 you can either use EIS for the whole lot, or you can raise the first £150,000 under SEIS and then use EIS for the rest. But if you use SEIS and then EIS, you must have spent at least 70 per cent of the SEIS monies before you can issue any EIS shares.
Q: The company must have no more than £200,000
in assets when the shares are issued. Is that before or after taking
liabilities into account?
A: That's a gross asset figure without taking account of any liabilities.
Q: My company hasn't drawn up a balance sheet
yet - what figure should I use for the assets limit?
A: You should include whatever assets you would include on a balance sheet if you were to draw one up immediately before the investment is made.
Q: The company has to have fewer than 25 employees. How should a company
deal with part-time or seasonal employees?
A: The company must have fewer than 25 full-time equivalent employees on the date the shares are issued, and you can calculate this in any way that is reasonable. You don't have to count staff on maternity or paternity leave, apprentices or students on vocational training
Q: Is it possible for an investor to invest more than the founders and
still meet the 30 per cent test?
A: Yes. The 30 per cent is calculated by reference to the nominal (face) value of the shares, not by reference to how much was paid for them. For example, the founders could have 4,000 £1 shares for which they paid £4,000, and a later investor could have, say, 1,000 £1 shares for which he paid £50,000. The £49,000 difference between the face value of the investor's shares and the share price will be shown on the company's balance sheet as a premium paid for the shares. The issued share capital will be shown as 5,000 £1 shares, of which the founders will have 4/5 (80 per cent) and the investors 1/5 (20 per cent). Your accountant will help you with this.
Q: Is there a minimum amount I have to invest -
I read somewhere that it was £500?
A: No. There used to be a £500 minimum investment limit for EIS (which may be what you’ve read about) but there isn't any more; and there's no minimum amount for SEIS. That should help, for instance, small community fund raising where lots of people want to invest small amounts.
Q: But there is a maximum amount I can invest?
A: Yes; it's £100,000 a year.
Q: Can I invest in more than one SEIS company?
A: Yes, so long as you invest no more than £100,000 in total in a year.
Q: Can I invest in SEIS and EIS in the same year?
A: Yes. £100,000 limit for SEIS, and £1 million limit for EIS.
Q: Will I get tax relief if I invest in my relative's
A: It depends. An investor doesn't qualify if he or she has more than a 30 per cent holding in the company. That 30 per cent is calculated by taking account of any holdings of associates of the investor. For this purpose, that includes spouses, parents, grandparents, children, grandchildren but not siblings, cousins, aunts, uncles. It also includes fellow partners in another business.