Time to reconsider the SEIS – Now more attractive?
Now that Royal Assent to The Finance Bill has passed, we are into a new regime for the EIS. While there are many positives about the new rules, there is no question that in the absence of capital preservation schemes, the overall risk profile of investing in the EIS has moved up the risk curve. The new watchword is Growth, in all its forms: start-up companies, scale up companies, businesses founded by entrepreneurs with a vision to grow, “Knowledge Intensive Companies” (already abbreviated to KICs), i.e. companies established off the back of research and development or intellectual property, Artificial Intelligence (AI), the Internet of Things (IOT) – these are the types of businesses which will qualify going forward. As ever, it’s considered wise is to spread your investment over a wide net of different businesses and can be achieved by investing in a Growth Fund.
But a little observed fact up to now is that the increase in the risk profile of the EIS can be seen to have the effect of making the SEIS comparatively more attractive. The SEIS was completely unaffected by the major changes first announced in the Budget last November and finally enacted last week, so it is surely worth taking another look at the considerable attractions of SEIS: 50% up-front Income Tax relief; Capital Gains Tax relief which is in fact better than that available in the EIS, consisting of a write-off of liabilities on half the value of the investment, loss relief, which when combined with income tax and CGT relief, can amount to as much as 86.5% of total cost; exemption from IHT after two years; but probably the most important being exemption from CGT on any gains made from your SEIS investment. If you spread your investment over 10 investments, for example, and say seven out of ten make money but three lose money, you get tax-free gains on the seven PLUS loss relief on the three. So there is no offset of relief between the separate investments, which is extremely generous.
Epicure SEIS Fund
Our current SEIS fund called Epicure focuses on food and drink products, the first of its kind. The fund is taking advantage of a huge revolution going on currently in the UK Food & Drink industry, which is being driven by younger people obsessed with health. Our portfolio to date consists of a range of food and drink products which are in the main low fat, gluten free, dairy free, with no added sugar or processed ingredients.
What is remarkable is that the major food retailers spotted this trend some time ago and have programmes in place to support and promote this new age of product. Waitrose, Ocado and Tesco are just three examples. The Investment Adviser to our Epicure Fund, Startup Funding Club, has established a relationship with the Tesco “Backit” programme, which offers new food and drink startups the opportunity to trial their products in selected stores.
The multi award winning Startup Funding Club have an outstanding reputation in the SEIS sector, having won three awards in the last 18 months. They are highly experienced, having invested in well over 100 SEIS companies since 2013, 15% of which have been food and drink companies. They provide a full “ecosystem” of nurturing and support, including the provision of lead investors, mentors and professional advisers on very favourable terms.