EIS & SEIS

Question 1

What trades are not eligible for SEIS or EIS

Answer 1

Financial services, banking, and insurance.

Property development.

Legal services.

Energy generation (for certain schemes).

Farming

Question 1

Key admin / compliance of EIS / SEIS?

Answer 1

• Companies must apply for advance assurance from HMRC to confirm eligibility.
• After issuing shares, companies must submit an EIS1 or SEIS1 compliance statement to HMRC within 4 months.
• Companies must comply with qualifying conditions (e.g., staying within asset and employee limits, and maintaining allowable trades) for at least 3 years after the investment.
• No prearranged exits are allowed; investments must be at risk.

Question 2

What are the key investor and company limits for EIS

Answer 2

EIS:
- Companies can raise up to £12 million under EIS.
- Investors can invest up to £1 million per year (or £2 million in knowledge-intensive companies).

• Companies must have gross assets below £15 million for EIS before investment.

Question 3

What are the key investor and company limits for SEIS

Answer 3

SEIS:
- Companies can raise up to £250,000 under SEIS.
- Investors can invest up to £100,000 per year.

• Companies must have gross assets below £200,000 for SEIS

Question 4

SEIS tax benefits?

Answer 4

• Income tax relief: 50% of the investment amount can be claimed as a reduction in income tax liability (on investments up to £100,000 per year).
• CGT exemption: If SEIS shares are sold after 3 years, no CGT is payable on the profits.
• Loss relief: If the SEIS investment fails, investors can offset their loss against their income tax or CGT liabilities.
• 50% CGT reinvestment relief: Half of the gains reinvested into SEIS shares can be exempt from CGT.

Question 5

EIS tax benefits?

Answer 5

• Income tax relief: 30% of the investment amount can be claimed as a reduction in income tax liability.
• Capital Gains Tax (CGT) deferral: CGT on other gains can be deferred if reinvested into EIS shares.
• Tax-free gains: No CGT on profits from EIS shares if held for at least 3 years.
• Inheritance tax (IHT) relief: EIS shares are exempt from IHT after being held for 2 years.