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EIS and SEIS

The Enterprise Investment Scheme and Seed Enterprise Investment Scheme are the governments two flagship schemes for encouraging investment in small business.

Alas, whilst they are useful tools for investors, they don’t really provide any benefit to business owners for their own investments in their businesses.

They are reliefs for investing in company shares, and don’t apply to investments in sole traders or partnerships.

EIS

  • 30% Income Tax relief on investments of up to £1m
  • 1 year carry back for Income Tax
  • Income Tax loss relief in year of sale if applicable
  • CGT exemption on any gain
  • Shares must be held for three years to get these reliefs
  • CGT deferral on a gain reinvested in EIS shares
  • Cannot control more than 30% of the company shares
  • Cannot be an employee or director

SEIS

  • 50% Income Tax relief on investments of up to £100,000
  • 1 year carry back for Income Tax
  • Income Tax loss relief in year of sale if applicable
  • CGT exemption on any gain
  • Shares must be held for three years to get these reliefs
  • CGT deferral on a gain reinvested in SEIS shares
  • Cannot control more than 30% of the company shares
  • Cannot be an employee but can be a director

In both cases the company cannot be engaged in “excluded activities“, for example:

  • dealing in land
  • providing banking or money lending services
  • providing legal or accountancy services
  • property development
  • farming
  • woodlands
  • hotels
  • care homes

This is a overview of the EIS / SEIS rules and more specific advice should be taken if needed. HMRC manuals are a good place to start – alas there is no simple guide on HMRCs website (reflecting these are not simple reliefs)