The Enterprise Investment Scheme (EIS) and Seed Investment Enterprise Scheme (SEIS) provide materially important tax benefits for investors in early-stage firms in the UK. Designed to encourage the support of entrepreneurs and younger firms, EIS and SEIS mitigate risk for investors while possibly generating tax-free capital gains when an investment provides a good exit.
An example of the immediate benefit of investing in an EIS or SEIS-approved firm is if you invest £1,000 in an EIS-eligible security, you are able to claim £300 (30%) back as tax relief – immediately. If the company is SEIS eligible, the amount of tax relief rises to £500. That is pretty huge.
While providing benefits for investors and encouraging the support of innovation, it also helps to boost the UK economy, driving jobs and wealth creation.
If you are interested, more information is provided here by the UK government.
The UK government also tracks firms utilizing the programs and provides data on activity periodically. You may view the information here.
For investment crowdfunding platforms, the two tax programs help to encourage activity. Issuers that have been approved by either EIS or SEIS are flagged on offering pages as a benefit for investors. To simplify the process for issuers and investors, Crowdcube recently announced a partnership with the digital tax platform TaxScouts to streamline and simplify the process for a small fee.
The new partnership provides access to two features:
- Users are able to claim up to 5 (S)EIS forms for a fixed £25
- Self-assessment users are able to access TaxScouts’ digital self-assessment tool for £131
Crowdcube admits that their own research indicates that 68% of Crowdcube investors with smaller portfolios (£5,000 or less) have not yet claimed the tax relief. More than half (56%) didn’t even know they could. Crowdcube surmises that there could be millions of pounds of tax relief, which has yet to be realized. Hopefully, the TaxScouts partnership will drive this number to zero.