SEIS Tax Benefit for Investing in Small Companies Made Permanent

SEISThe Seed Enterprise Investment Scheme (SEIS) was announced as becoming permanent yesterday as part of Chancellor of the Exchequer George Osborne’s budget presentation.    Introduced in 2012, the tax incentive for people to invest in early stage companies has been viewed as a groundbreaking approach to help boost the UK economy.  The SEIS is widely leveraged by equity crowdfunding platforms as an enormous encouragement for investors to participate in startup companies.

In brief SEIS investors may put £100,000 in any number of companies in any given year.  Investors may receive  a 50% tax relief – regardless of their tax bracket.  Importantly there is no capital gains tax on any increase in valuation and no inheritance tax.  In the years of 2012 & 2013 it was possible to write off 100% of an individual’s investment –  provided you had paid enough taxes to offset the SEIS investment.

The government estimated that in the first months of enactment the SEIS helped over 1,100 companies raise capital to grow and expand.  Companies were estimated to have  raised over £82 million with an average raised per company at £72,000.  During last year – on average 19 companies raised £1.3 million in SEIS each week.

Chancellor of the Exchequer George OsborneChancellor Osborne was quoted last last year on the SEIS incentive;

I want the UK to be the best place in the world to start, finance and grow a business. That’s why I’ve put in place a scheme that rewards people who get behind entrepreneurs – and am delighted that over 1000 start ups have already taken advantage of the scheme.

The UK is full of budding entrepreneurs who have struggled to realise their ideas because of problems accessing finance. The Seed Enterprise Investment Scheme along with Start Up Loans and The Business Angel Co-Fund – are designed to financially back start ups. And next year we are going further by introducing an employment allowance – cutting up to £2000 off every business and charity’s National Insurance Contributions bill.

These measures will help start ups that create jobs, opportunities and wealth in Britain and are a key part of our economic plan.

The SEIS compliments the Enterprise Investment Scheme (EIS) which was launched in 1994.  EIS targets small companies having maximum gross assets of £15 million with 250 or less employees.  Income tax relief stands at 30% and benefits from no capital gains tax and no inheritance tax similar to the SEIS tax benefit.

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