This is a scheme to encourage investment in very early stage small companies. Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and CGT exemption for any gains on the SEIS shares. For 2012-2013 only, a CGT exemption will be offered in respect of gains realised on the disposal of assets that are invested through SEIS in the same year.

Baker Tilly analysis

We welcome the new Seed Enterprise Investment Scheme (SEIS). The tax benefits to investors are valuable; however given the size restrictions it is likely to be of limited benefit and only to the smallest of companies. 

The maximum cumulative investment per company is £150,000 and SEIS will only apply to small recently incorporated companies which are embarking on a genuine new trading venture. 
Investors will need to be careful as to timing if they intend to invest larger sums to ensure EIS relief is not precluded. We shall certainly be raising this and other issues in the 12 week consultation period intended.

In detail

The main features of the relief are as follows.

• Investors can receive initial income tax relief of 50% on investments up to £100,000 per tax year in qualifying shares issued on or after 6 April 2012;
• Gains on shares within the scope of SEIS will be exempt from capital gains tax;
• A CGT exemption will offered in respect of gains realised on the disposal of assets in 2012-13, that are reinvested through SEIS in the same year;
• There is a maximum cumulative investment per company of £150,000;
• The individual investor cannot be an employee of the company, but can be a Director;
• The individual must have a stake of less than 30 per cent in the company;
• The scheme will apply to recently incorporated companies which are carrying on or preparing to carry on a genuine new trading venture. Broadly, this should not involve the transfer in of a trade or the acquisition of trading assets from connected parties;
• The company must have 25 or fewer employees and gross assets of up to £200,000;
• All the money raised must be spent with 3 years for the purpose of the qualifying business activity;
• The relief cannot be claimed until at least 70% of the money raised has been spent;
• Before a company can raise further money under the EIS/VCT rules it must have spent at least 75% of any money raised under SEIS; and,
• Requirements and anti-avoidance rules are imported from the EIS legislation.