SEIS Vs EIS

Main differences between Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)

 

From 6 April 2012, the Seed Enterprise Investment Scheme (SEIS) was introduced enabling certain individual investors to benefit from generous tax reliefs for investing into start up companies. At the same time, significant changes were introduced to the Enterprise Investment Scheme (EIS) allowing certain individual investors to invest more money into larger (more established) companies thereby enabling them to access more in the way of tax relief.

 

Now that a few months have passed since these changes and, further to our feature on SEIS in the Summer, we thought it would be useful to compare the two schemes from an investment company and investor point of view:-

 

 

 INVESTMENT COMPANY             EIS                                                                        SEIS
Structure Unlisted company. Maybe listed on Aim but not the main market. Unlisted company less than 2 years old. May be listed on Aim but not the main market.
Qualifying Company Gross assets £15m limit pre investment. Gross assets £16m limit post investment. Fewer than 250 employees. New company with gross assets of less than £200,000.Fewer than 25 employees.
Company Investment Limit £5m subject to state aid approval. £150,000 (total). This is a cumulative limit not annual.
Use of Money Must be used within 2 years. Must be used within 3 years.70% of funds must be used before applying for EIS/VCT schemes.
Subsidiaries May have a subsidiary subject to certain conditions. May have a subsidiary provided it owns 50% of the ordinary share capital and another company does not control the subsidiary.
 INVESTOR
Maximum individual investment per tax year £1m. Any unused annual amounts can be carried backto the previous year. £100,000. Any unused annual amounts can be carried back to theprevious year.
Form of Investment 100% shares and must be fully paid up. 100% shares and must be fully paid up.
Connection No employee investment. Business Angels can invest subject to being a director receiving no remuneration. Cannot hold morethan 30% of share capital, voting rights, entitlement to assets on winding up 2 years before issue of shares and 3 years after. No employee investment. Directors can invest subject to the 30% no substantial interest rule. Cannot hold more than 30% of share capital, voting rights or entitlement to assets on winding up.
Subject to Anti Avoidance Measures Yes, investors will be subject to a disqualifying purpose test. Yes, investors will be subject to a disqualifying purpose test.
 TAX 
Income Tax Relief 30% 50%
Eligibility for tax relief 3 years. 3 years.
Carry back tax relief to previous year? Yes, up to 100% of investment. Yes, up to 100% of investment.
CGT Reinvestment Relief Yes, deferral for gains when investment in EIS madewithin 1 year before or 3 years after the gain arose. Yes, CGT exemption for gains realised and reinvested in 2012-2013.
CGT Liability Nil after 3 years. Nil after 3 years.

 

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