Business Investor Tax Reliefs

Whether you’re a director of a company looking to attract investment, or an investor looking for a good opportunity, the EIS and SEIS could help you.  Unlike traditional financing options, capital investments can often bring the advantage of direct access to the wealth of business experience an investor can offer, further helping your business to grow.  After all, business growth is in their interest too.

The EIS and SEIS, which can be used in conjunction with one another, are designed to help private companies attract capital investment to help drive their business forward. In return, investors receive shares in the company and a mixture of generous income and capital gains tax reliefs on their investment.  In many cases, investors will also be able to offer business experience and expertise that will further benefit the company.

EIS is intended for new and existing companies looking to raise funds to support their growth plans.  In return for no more than 30% of the company’s issued ordinary shares, the investor is afforded 30% income tax relief as well as capital gains tax deferral relief on the value of the investment.  In addition, if certain criteria are met throughout the qualifying period, the EIS shares will attract complete capital gains tax exemption on their eventual sale.  Companies can raise up to £5m per year and £12m in total through the EIS.

Smaller companies embarking on new trades may first wish to consider using the SEIS.  Provided the trade is less than 2 years old, SEIS could help companies attract up to £150,000 of investment in exchange for the investor receiving no more than 30% of the issued ordinary shares and 50% income tax relief, partial capital gains tax exemption for unrelated gains and the same complete capital gains tax exemption on the sale of the SEIS shares as is afforded to EIS shares.

Given the generous tax reliefs they provide, the legislation governing the schemes is tightly policed and falling foul of it could prove costly.  Getting expert support from Walpole Dunn could help ensure that your company and investors remain fully compliant with the rules.

If you’re an investor looking for help in claiming your tax reliefs, or a business looking at whether or not SEIS or EIS could help you attract investors, contact us today to discuss how we can help.