With Royal Assent to The Finance Bill having been granted in March this year, we are now firmly 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” (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.
Seed Enterprise Investment Scheme
The risk profile of the EIS has had the effect of making the SEIS relatively more attractive. The SEIS was completely unaffected by the major changes first announced in the Budget last November and enacted in March, 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 receive 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.
SFC SEIS Fund
In partnership with Startup Funding Club (SFC), our latest SEIS opportunity the SFC SEIS Fund (the Fund) will invest in a portfolio of primarily early stage SEIS companies across all sectors, with strong growth, compelling exit prospects.
As the valuations of early stage startups are still considered relatively modest, the Fund will be able to acquire meaningful strategic shareholdings in these companies to maximise the potential return. We believe that investing at the earliest stages of commercial exploitation gives the highest potential to realise significant capital appreciation.
The Fund will take advantage of the UK’s nurturing landscape which includes the presence of world-leading universities and Fortune 500 companies, specialist tech capabilities, great infrastructure, a pre-eminent financial centre, and supportive policies for SMEs.
The multi award winning Startup Funding Club have an outstanding reputation in the SEIS sector, having won three awards in the last 2 years. They are highly experienced, having invested in well over 100 SEIS companies since 2013, They provide a full “ecosystem” of nurturing and support, including the provision of lead investors, mentors and professional advisers on very favourable terms.
If you are interested in learning more about the Seed Enterprise Invesment Scheme (SEIS) please do not hesitate to contact us.