How SEIS works
The Seed Enterprise Investment Scheme is for new companies. Investors get 50% income tax relief on the amount they invest. If they keep the shares for at least three years, any gain is free of Capital Gains Tax, and if the company fails they can claim loss relief. For an additional-rate taxpayer who loses the whole investment, each £1 invested costs 27.5p. The 50p of income tax relief leaves 50p at risk, and loss relief at 45% on that 50p gives back 22.5p. A company can raise up to £250,000 under SEIS in total.
How EIS works
The Enterprise Investment Scheme covers the larger rounds after SEIS. A company can raise up to £24m over its life, or £40m if it is a knowledge-intensive company (one that spends a large share of its costs on research and innovation), and investors get 30% income tax relief. It suits later, larger raises once the company is past the SEIS limits.
The order of share issues, and the paperwork
Raise under SEIS before EIS, because a company that has already raised money under EIS cannot use SEIS. Both schemes need ordinary shares that carry the full risk, paid for in full in cash when they are issued, and a compliance statement (form SEIS1 or EIS1) sent to HMRC after the round before investors can receive their certificates. Get advance assurance, HMRC's view that the company is likely to qualify, before you pitch, because most angels will not invest without it. Our SEIS and EIS page covers the process in more detail.
