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SEED Enterprise Investment Scheme
|Solicitors for companies seeking start-up capital funding: documentation package: advising entrepreneurs & investors: intellectual property law specialists|
SEIS was announced in the 2011 Autumn Statement and will form part of the Finance Act 2012. This scheme will apply to qualifying share issues which take place after 6 April 2012 and before 6 April 2017.
SEIS provides very attractive tax reliefs for individuals investing in new ventures. However, as with any investment in a limited company care needs to be taken at the outset to ensure that problems are not encountered further down the line.
Humphreys & Co. act for both investors and owners in implementing SEIS investments. We can supply the package of documents needed to implement a SEIS investment at cost-effective fixed charge rates.
Those documents are likely to include a form of investment/shareholders’ agreement to regulate the rights and responsibilities of the parties going forward.
To discuss implementing a SEIS investment contact Neil Holly in our Company and Commercial Unit who will be pleased to get back to you with proposed costings and next steps.
Some of the key aspects of the scheme are summarised below.
Companies to which the scheme applies
SEIS is a version of the Enterprise Investment Scheme designed for smaller companies and new start-ups.
To qualify the company into which the investment is made must satisfy (amongst others) the following requirements:
- The company must be an unquoted company which has been incorporated within 2 years of the date on which the shares are issued.
- The purpose of the company must be to carry on a qualifying trade as a genuine new venture.
- The company must not be controlled by another company nor be a member of a partnership.
- The gross assets of the company must not exceed £200,000 immediately before the shares are issued.
- The company must have fewer than 25 employees.
- The total amount of SEIS investments made into the company must not exceed £150,000.
Requirements in relation to the investment
- The investment must be made by an issue of ordinary shares, fully paid up and for cash.
- Neither the investor nor his associates (which includes business partners, civil partners, parents and grandparents, children and grandchildren) can be an employee of the issuing company at any time from incorporation to the third anniversary of the issue of the shares (but a person who is a director will not be treated as an employee).
- The investor cannot hold more than 30% of the issued share capital, or voting rights, or rights to its assets in a winding up of the target company at any time from the date of its incorporation until the third anniversary of the issue of the shares.
- The shares must be held by the investor for 3 years after they are issued.
- All of the money raised by the investment must be spent by the issuing company for the purposes of its qualifying business activity within 3 years after the shares are issued.
The tax reliefs
SEIS provides 3 separate tax reliefs:
- Income tax relief by way of reduction of tax liability of 50 per cent of the cost of the shares, on a maximum annual investment of £100,000.
- For the tax year from 6 April 2012 to 5 April 2013 Capital Gains Tax (“CGT”) relief can be obtained on chargeable capital gains arising from the from the disposal of an asset made in that tax year which are reinvested in the SEIS within the same year (again this is subject to the £100,000 maximum investments).
Any gain on disposal of the SEIS shares after the third anniversary of their issue will be exempt from CGT.
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We are an independent professional law firm here, not a legal factory turning out mass-produced products. In our experience, determined case-handling is more likely to produce effective results.
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Solicitors at Humphreys & Co. always try to open up the
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clear courses of action whatever the technical or legal
complexities of the subject.