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What is a Seed Enterprise Investment Scheme (SEIS)?

The Seed Investment Enterprise Scheme is much newer that its parent initiative, EIS, having been set up as recently as 2012.

It is very similar to EIS but designed for investing in even smaller companies and providing even more generous tax breaks.

While the maximum workforce and gross assets allowable under EIS are 250 staff and £15 million respectively, SEIS has lower limits of 50 staff and £200,000 gross assets. Businesses must also be less than two years old (there are no age restrictions under EIS).

The tax breaks are as follows:

  1. Income tax relief is 50%, not 30% so you get £5,000 off your income tax bill for investing £10,000 under SEIS.

  2. As with EIS, there is no capital gains tax to pay on profits, no inheritance tax and you can claim loss relief in the same way.

  3. There is an extra relief called capital gains reinvestment relief. This is useful to you if you have recently paid capital gains tax on other investments. You can reclaim up to 50% of the tax paid if you reinvest that money into SEIS. This was originally introduced as a temporary measure but in the 2014 Budget, Chancellor George Osborne made it permanent.

The tax reliefs available through SEIS are so generous that for the 2012/13 tax year, they added up to a potential 100.5% of your investment in a situation where that investment was a complete failure. In other words, you literally could not lose provided you had paid enough tax to offset your SEIS investment against.

However, for the 2013/14 and 2014/15 tax years, the downside protection has fallen 86.5% - so you will get back £8,650 from a £10,000 investment that totally fails, if you pay enough tax to use all the reliefs. This still an excellent buffer.

The maximum you can invest through SEIS in any tax year is £100,000.

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