Efficient tax investing is one of the most popular choices on the investment landscape, with multiple savvy investors involved at some level of seed enterprise investment scheme (SEIS) in their business portfolio. In layman’s terms, the scheme has proven to be quite successful for startups as it helps attract private investment by offering tax incentives to the capitalists.
However, there are several conditions that a business needs to qualify for the same, some of which are widely known to both in vestors and entrepreneurs. For instance, the age requirement condition needs a SEIS company to be in operation for at least two years. Apparently, the enterprise investment scheme, aka EIS, has not to be in trade for more than seven years.
If you are also seeking SEIS investment funds from a potential investor, then some fundamental requisites are equally important. In this post, we have mentioned the most important things that most entrepreneurs are unaware of. Eventually, that has somehow led to numerous problems while availing benefits of the schemes.
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Fixed and Current Assets Requirement
For the Seed EnterpriseInvestment, the gross asset value of the business immediately before the shares are circulated must not exceed the margin of £200,000. Whereas, for the EIS, it is quoted as around £15 million and £16 million before and after the issuance, respectively. Keep in mind that HM Revenue and Customs, UK, will check further whether the business participating abides by this requisite during the form application or processing.
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Human Resources Requirement
Under the seed enterprise investment scheme tax relief banner, a business should not have more than 25 full-time employees, particularly when SEIS shares are assigned. While for an EIS, the business should not have more than 250 full-time employees when the shares are circulated.
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Subsidiary Requirement
Suppose the business has a chain of command with subsidiaries and parent companies. In that case, the holding business needs to apply for an EIS/SEIS. A business is considered a subsidiary of another business that owns more than half of the shares.
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Financial Health Requirement
A business should not be in financial penalty/difficulty while applying for an EIS or SEIS. Generally, there is no specific definition of what accounts for a financial complication. If the business is still facing some serious financial concerns, it may not be eligible under this point. The condition assures that businesses applying for the scheme have a good financial standing. The investment they will receive is for growth and development.
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Trade Requirement
The business applicant must utilise the investment raised through an enterprise investment scheme or seed enterprise scheme to grow and develop an eligible enterprise. A detailed list of qualifying trades can be found on the HM Revenue and Customs, UK website.
ENDNOTE
All of the requirements mentioned above must be validated to be a business availing of the benefits of seed enterprise investment scheme tax reliefs. Even though most businesses are tested in the course of advance assurance review, HM Revenue and Customs, UK reassess the business’s compliance once the SEIS/EIS application form, also termed as compliance statements, is submitted. It is only when the Revenue and Customs issues one of them that the business is confirmed that it can offer EIS/SEIS to the investors. Failing to meet even one of any requirements can put the business’s eligibility to avail of the benefits on the line.
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