SEIS – attracting investment in start up companies ?

Cliona Kirby, Tax Partner, CMS

We are pleased to see the Government confirm their intention to introduce a new tax relief for seed investment in start up companies.   Obtaining seed capital has been challenging for digital media and technology companies.  To recap the new relief provides 50% income tax relief on investments up to £100,000 per annum per individual.    There is also a maximum amount that can be raised from SEIS of  £150,000 per company.     

Another attractive element of the new regime is that any gains on disposal of the shares will be tax free provided the individual has held the shares for 3 years.    For one year only in 2012-2013 an individual can roll over capital gains  of up to £100,000 into an SEIS investment. 

The good news is that there will be an advance assurance process similar to the existing EIS regime.  Although HMRC will give an early indication of whether the SEIS rules are met they will not provide a binding assurance until after the Finance Bill receives Royal Assent which could result in investors waiting to invest until July/August.  

We also understand that it should be possible to raise an SEIS fund which can then invest up to £150,000  per company which would help to spread the investor’s risk across a number of companies. 

However, if a company is looking to combine SEIS and EIS/VCT monies then it will need to have spent 70% of the monies raised from the SEIS investment first.

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