UK Program, Used by Crowfunding Platforms, Dramatically Encourages Investments in Small Businesses.
Her Majesty’s Treasury has released some initial results from their Seed Enterprise Investment Scheme (SEIS) which is a widely used tax incentive on UK based equity crowdfunding platforms. The HM Majesty’s early data indicates the SEIS has helped over 1,100 companies raise over £82 Million in finance. Described as “Vital” this dramatic form of tax relief for individuals willing to invest in risky startups and small businesses has helped companies acquire the funding they dearly need to expand and create jobs.
Launched in 2012, SEIS offers tax relief to individual investors buying shares in small companies at a very early start up stage. Current data indicates that on average, £1.3 million of SEIS funding is raised by 19 companies every week through the program. The average amount of investment raised by a company is £72,000 (about $115,000 USD).
The SEIS program allows companies to raise up to £150,000 of equity finance. Providing early stage funding and offering an additional or alternative to bank lending, as well as potential access to angel investors that can provide invaluable business experience. The HM Majesty research indicates that many companies would not have been able to have found funding for their businesses. On UK crowdfunding platforms participation in the SEIS and EIS programs are normally indicated by a badge on the offer. Businesses must qualify prior to indicating the equity offering may take advantage of either of these programs.
Chancellor of the Exchequer, George Osborne, said:
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.
Investors may invest up to £100,000 a year in SEIS qualifying companies and will in turn receive 50 per cent of their investment back as income tax relief. Investors using capital gains realised in 2013-14 and investing that gain in that same year or the following year will receive 50 per cent capital gains tax relief on the amount invested when investing in an SEIS qualifying company.
SEIS builds on the long-standing Enterprise Investment Scheme (EIS), which was launched in 1994. This program, which has reportedly generated over £8.6 Billion in funds raised, provides tax relief for investors in small, high-risk companies. The two programs may be used in a complimentary manner.
HM Treasury has also released an Infographic pertaining to SEIS.
