Seed Enterprise Investment Scheme (SEIS) Service

Those investing mustn’t hold – either directly or indirectly – over 30% of the business’s regular share capital, (as well as its issued share capital) or voting rights. Any investors who are also employees of the company will not be able to benefit, either. However, new or current directors can qualify for this. Regardless of whether the business meets each of the required criteria, it won’t have eligibility if the investment is not for realistic, commercial purposes, and is for tax avoidance purposes.

The kind of shares that are eligible for SEIS relief must be new shares without special rights assigned to them. They have to be subscribed only in cash (meaning that the consideration must not be through other assets), and this cash needs to be paid fully before the issuance of the shares.

The aim of the shares being issued, is primarily for the raising of money for a qualifying company. The finances that are raised have to be used in a qualifying trade, and continued on by the parent company (or 90% subsidiary), within 3 years.

Shares that were issued either on or after 15th March 2018, must meet the condition known as ‘risk to capital’, so the SEIS relief can be made available. This condition is a way of excluding investments which are created to maintain capital for investors.

If this condition is adhered to – keeping in mind all the other circumstances – it would be a fair conclusion that the issuing company has targets to expand and innovate its trade over a longer scale of time. For the investor, therefore, it could become a risk that they would lose a larger amount of capital when comparing it with their Net Investment Return.

The Compliance Statement form is used by the business undergoing investment to verify that specific conditions within the scheme are upheld. The Compliance Statement form can’t be submitted until:

• More than 70% of the money raised by the issued share is used solely for reasons relating to the activities of the qualifying company

• The new qualifying business (which consists of the qualifying trade activity, or by which the specific activity relates to) has been undertaken for over 4 months by either the business issuing the shares or a subsidiary of that company, holding a qualifying 90%

• If the decision is made not to commence with the investment, or, that it may not be meeting the required SEIS conditions, then you are able to review and possibly appeal against this decision

• A covering letter

• The SEIS advance assurance form (if this has been applied for)

• A business plan

• A note of any minimal aids you may have received

• Your tax reference number

• A shareholders agreement

• The company accounts

• The amount which is looking to be raised

• Articles of Association

• An outline of the purpose of these finances