The SEIS provides for extensive Income Tax and Capital Gains Tax (CGT) breaks for investors and this greatly encourages much needed seed capital in new businesses. The SEIS is most valuable for taxpayers who can fully benefit from the tax reliefs on offer.
For investors the main benefits of the scheme are as follows:
The availability of both Income Tax and CGT relief has made the SEIS a very popular scheme. The reliefs are only available where there is sufficient liability against which to set the relief. Under certain circumstances, small business owners can also use the scheme to invest in their own businesses. Of course, investors must consider the importance of picking a good company to invest in and carry out proper due diligence.
There are a number of conditions which must be met in order to invest in the scheme. For example, the scheme can only be used to invest in small companies i.e. companies with gross assets of no more than £200,000 and with less than full-time equivalent 25 employees. A company can raise a maximum of £150,000 through the SEIS but can go on to use other schemes such as the EIS to raise further funds.