What Is the Enterprise Investment Scheme and Is It the Same as Seed Enterprise Investment?

By Payal On Mar 14, 2022

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By clicking on this article, you must be wondering what The Enterprise Investment Scheme and Seed Enterprise Investment Schemes are. These are government schemes to encourage investment into start-ups by angel investors or venture capital funds that may otherwise find it difficult to source conventional funding. Both schemes offer opportunities for underlying individual investors to receive an income tax break and capital gains tax exemption when investing in shares in early-stage companies which have received “advanced assurance” of qualifying for the Seed / Enterprise Investment Schemes . Although The Enterprise Investment Scheme and The Seed Enterprise Investment are sister schemes, they do have a few differences between them, but they are both great investment opportunities for investors based in the UK.

So, what is the difference?

The main difference between the two schemes is the Seed Enterprise Investment Scheme is made for early-stage start-up companies and Enterprise Investment Scheme is for slightly well-developed businesses. The Seed Enterprise Investment is for companies with under 25 employees with assets of up to £200k and the maximum Seed Enterprise Investment Scheme investment that can be received by the company is £150,000 within 2 years of beginning. For an individual, the maximum Seed Enterprise Investment Scheme investments which can be made in a single tax year is £100,000.

In contrast, the Enterprise Investment Scheme is for slightly older companies; since qualifying companies can attract EIS investment for 7 years since the company began tradingFor EIS, the maximum investment for the company is £5m per year or £12m in total and the maximum Enterprise Investment Scheme investments an individual can make each year is £1m.

Let’s break down the Tax Breaks Available for Each of the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme

Tax Breaks
	Enterprise Investment Scheme	Seed Enterprise Investment Scheme
Tax Relief on investment	Up to 30%	Up to 50%
Capital Gains	A capital gains tax exemption on the sale of the shares if they have been held for 3 years.	A capital gains tax exemption on the sale of the shares if they have been held for 3 years.
Capital gains tax reinvestment relief	Available when gains arising on the disposal of any asset are reinvested in shares in a company on which Enterprise Investment Scheme tax relief is received. This is also available to some connected parties even if they cannot claim income tax relief.	Available when gains arising on the disposal of any asset are reinvested in shares in a company on which Seed Enterprise Investment Scheme income tax relief is received. This relief enables an individual who has disposed of an asset to treat a maximum of 50% of the gain as exempt from CGT. The maximum amount of reinvestment relief that can be claimed is £50,000.
Company Requirements
Maximum gross the investee assets	£15m	£200,000
Maximum investment allowed	£12m or £20m	£150,000
Maximum number of employees	250 or 500	25