Explaining SEIS vs. EIS Tax Advantage Schemes
What are early investment schemes?
Have you heard of SEIS or EIS? If you are a start-up, entrepreneur or SME in the UK, looking to gain early-stage investment, there are a few schemes that might benefit you. A tax-advantaged investment scheme refers to a government funding scheme. These allow investors to claim back tax benefits when investing in small companies.
SEIS and EIS are two tax advantage schemes for UK companies. They are definitely worth looking into with your accountant when considering early investment as a route to growth. But what do these acronyms mean?
What is SEIS?
SEIS stands for Seed Enterprise Investment Scheme. This is a scheme designed for early-stage companies who are seeking seed funding. The scheme essentially offers tax incentives to individuals who invest in your company. In order to do this, your company must meet the qualifying standards for SEIS.
In order to be eligible for the SEIS scheme, companies must have been trading for less than 3 years and have assets under £350,000. For investors, individuals can invest up to £200,000 in a tax year and receive various tax incentives, such as up to 50% in tax relief in some cases.
What is EIS?
EIS stands for Enterprise Investment Scheme. EIS is a scheme to support SME (small and medium business) investment in companies who are not recognised on a stock exchange list. When investors provide funding support for eligible EIS companies, they can receive tax benefits back.
In order to be eligible, companies need to have been trading for 7 years or under and have up to £15 million in gross assets. Investors can provide up to £1 million per tax year in investment to receive incentives back. Tax relief can be provided up to 30% of the amount invested, depending on a case by case basis.
What are the differences between SEIS and EIS?
The key distinction between the two, is where the stage of business the investor is supporting. SEIS is specific to seed capital i.e. very early-stage businesses who are looking to raise capital for the first time. EIS is available to a wider range of SMEs, however the tax incentives are usually a lower percentage than SEIS at around 30%.
These schemes are definitely worth looking into to boost interest from potential investors or equity crowdfunding sites.
Considering raising capital?
If you are looking at raising investment or considering equity crowdfunding, we would be happy to have a chat through the general process. We have experience aiding with your early process to ensure you and your pitch are investment ready.
We highly encourage you to consult with your accountant to see whether you are applicable for either of these schemes.
Scheme parameters may undergo updates after this blog. You can find more info on SEIS and EIS on GOV.UK.
Thanks for reading! 🙂
