The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are UK government initiatives to encourage investment in small, high-growth companies. They offer generous tax incentives to reduce the risk of investing in startups and early-stage businesses. However, they come with specific requirements for both investors and companies.

Investor Requirements for SEIS/EIS

1. Investor Residency and Tax Status:some text
   • Residency: You do not need to be a UK resident to invest in SEIS/EIS, but only UK taxpayers can claim the tax relief.
   • Income Tax Obligation: Relief is available only for individuals who pay UK income tax.
2. Amount of Investment:some text
   • SEIS: Maximum investment of £200,000 per tax year.
   • EIS: Maximum investment of £1 million per tax year, or up to £2 million if at least £1 million is invested in "knowledge-intensive" companies.
3. Holding Period:some text
   • Investments must be held for at least three years to retain the income tax relief and avoid capital gains tax (CGT) on profits.
4. Non-Connection Rule:some text
   • Investors cannot hold more than 30% of the shares in the SEIS/EIS company, including shares owned by associates (such as spouses, parents, children).
   • Investors generally cannot be an employee, paid director, or have a significant influence over the company (exceptions apply for “business angel” investors who may be unpaid directors).
5. Source of Funds:some text
   • Investors should ensure they use their own funds for SEIS/EIS investments, not borrowed capital, as borrowing specifically for SEIS/EIS investments can disqualify the tax relief.

Tax Reliefs for SEIS/EIS Investments

1. Income Tax Relief:some text
   • SEIS: 50% income tax relief on investments up to £200,000 per individual per tax year.
   • EIS: 30% income tax relief on investments up to £1 million (or £2 million for knowledge-intensive companies).
2. Capital Gains Tax (CGT) Relief:some text
   • SEIS: 50% exemption on gains reinvested in SEIS-qualifying shares, plus no CGT on gains from SEIS shares if held for three years.
   • EIS: No CGT on gains from EIS shares if held for three years.
3. Loss Relief:some text
   • If the investment fails, investors can offset losses against their income tax or capital gains tax liabilities.
4. Inheritance Tax Relief:some text
   • SEIS/EIS shares qualify for Business Property Relief (BPR), meaning they can be passed on free of inheritance tax after two years.
5. Reinvestment relief:some text
   • 50% CGT relief on gains from an investment in a non-SEIS company, if gains are reinvested into an SEIS-eligible company

Requirements for Companies to Qualify for SEIS/EIS

1. Type of Company:some text
   • Must be an unquoted company (not listed on a major stock exchange, although AIM-listed companies may qualify).
   • Must have a “permanent establishment” in the UK. 
2. Trading Activity:some text
   • Must be actively trading and carrying out a qualifying trade. Certain sectors, such as financial services, energy generation, and property development, are excluded.
3. Size of the Company:some text
   • SEIS: Companies must have less than £350,000 in gross assets and fewer than 25 employees at the time of the investment.
   • EIS: Companies must have less than £15 million in gross assets and fewer than 250 employees (500 employees for knowledge-intensive companies).
4. Age of the Company:some text
   • SEIS: Companies must be less than three years old (date defined as first commercial sale).
   • EIS: Companies must be less than seven years old (10 years for knowledge-intensive companies).
5. Use of Funds:some text
   • Funds must be used for growth and development, not for purchasing existing shares or for certain asset purchases like land.
6. Maximum Investment:some text
   • SEIS: £250,000 lifetime maximum per company.
   • EIS: £5 million per year and a £12 million total limit per company (or £10m per year and £20m over the lifetime for knowledge-intensive companies).

How to Invest in SEIS/EIS

• You can invest in SEIS/EIS-qualifying companies directly with companies offering these schemes. Always verify that the company has received HMRC Advance Assurance for SEIS/EIS status to ensure your investment qualifies for the intended tax reliefs. 

If you're a business that needs helping completing the necessary paperwork for SEIS and EIS, get in touch.