CANALITIX ACCOUNTANTS assist Clients with registering for the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).
UK Government-backed Venture Capital Schemes
The UK Government has 4 venture capital schemes that offer tax reliefs to individuals who buy and hold shares, bonds, or assets for a specific period. The schemes are designed to help small or medium sized companies and social enterprises grow by attracting investment.
There are several conditions that the company, investor, and the proposed investment must need to satisfy before they qualify for the scheme benefits. HMRC will provide companies with advance assurances to confirm if proposals to raise money is likely to qualify before you apply.
The Enterprise Investment Scheme (EIS) is one of 4 venture capital schemes. The Seed Enterprise Investment Scheme (SEIS) is for start-up companies under 2 years old and with gross assets of less than £200K, less than 25 employees and not previously involved in a different trade.
The Social Investment Tax Relief (SITR) is appropriate for social enterprises, such registered charities, community interest companies and community benefit societies. To qualify for SITR, social enterprises must have less than £15 million in gross assets and fewer than 250 employees.
The Venture capital trust (VCT) is a company that has been approved by HMRC and invests in, or lends money to, unlisted companies. A VCT can invest in companies which have been trading for under 7 years since their first commercial sales, have gross assets are no more than £15 million and have employ less than 250 staff.
How the scheme works
The scheme is only open to non-listed UK companies and companies which are not part of a group of companies.
Individual investors obtain tax relief on new shares acquired in an EIS/SEIS registered company.
The EIS company can raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime. The lifetime limit applies to amounts received from other venture capital schemes.
Tax relief is only available where the scheme rules are followed and HMRC may withdraw relief investors where the company does not follow the rules for at least 3 years after the investment is
made.
In addition to restrictions on how the money raised from new share issues can be used, there is a time limit of 2 years for the money to be spent on a qualifying business activity. A qualifying business activity is either a qualifying trade; preparing to carry out a qualifying trade; research and development that is expected to lead to a qualifying trade