Which is the best SEIS?

Which is the best SEIS?

Searching for an SEIS that will give you a healthy return is like searching for a needle in a haystack, however if you do feel this is the right investment for you we can aid in your search.

What is a seed enterprise investment scheme (SEIS)?

The Seed Enterprise Investment Scheme (SEIS) was introduced in 2012 by HMRC to help small, early-stage companies raise funds through investors. The idea is to help smaller businesses raise money and grow.

You can claim relief on up to £100,000 invested through the scheme per annum and SEIS companies can be invested in directly or through a SEIS fund. As these kinds of firms tend to be riskier than established firms, the tax reliefs you can claim are greater than those offered by schemes such as the Enterprise Investment Scheme (EIS).

How does a SEIS work?

SEIS is designed to help new businesses attract and secure seed funding. There are many rules about which companies can receive funding in this way, as well as what the funding can be used for. For business to qualify for the SEIS, the investment has to be spent within three years and must only be spent on qualifying trade.

How much can I invest in a SEIS?

The maximum amount you can invest is £100,000 per tax year. The minimum investment will vary depending on the fund, but it is typically around £10,000.

What tax reliefs are available on a SEIS?

The current tax reliefs available on SEIS investments are as follows:

• Up to 50% income tax relief
• Tax-free growth
• Up to 50% Capital Gains reinvestment relief
• Inheritance tax relief

As with all investments, SEIS are considered long term and the minimum holding term is three years in order to retain the tax relief.

When can I claim tax relief on a SEIS?

You can claim income tax relief as soon as you receive your allotted shares in the company you have invested in. Following this, you can claim the tax relief via your tax return for that tax year.

If you have already submitted your tax return you can still claim the relief, as a claim for SEIS tax relief can be submitted five years after the 31 January following the tax year in which the shares were issued.

How do I invest in a SEIS?

SEIS investments are not traded on the stock market so you will need to invest via a specialist broker. Some SEIS investments can be invested in at any time and others will only close once they have reached their target investment amount.

How do I sell a SEIS investment?

As SEIS investments are not traded on the stock market, you cannot sell them in the same way you would sell other investments.

SEIS investments will have an exit strategy and timeframe which is disclosed to you at the outset, and this can vary but it is generally around four years.

What returns do SEIS investments offer?

Any returns on a SEIS are likely to be by way of capital growth rather than dividends. SEIS investments will typically indicate a return, but this is a target return and cannot be guaranteed.

The amount of the return will vary but generally, the riskier the company you are investing in, the greater the potential returns are likely to be. It is therefore imperative that you are willing to accept potentially higher levels of volatility and you are able to withstand potential losses.

Should I consider investing in a SEIS?

SEIS investments aren’t for everyone and are generally aimed at experienced or wealthy investors. SEIS investment may be a good option for:

• People with a large income tax liability due to the attractive income tax reliefs available to those investing is SEIS investments.
• People who have capital gains tax liabilities as these could be reduced by up to 50%.

Things to consider before investing in a SEIS scheme

SEIS investments are generally considered high risk and are aimed at wealthy or experienced investors. If, however, you would like to find out more about SEIS investments or feel that might be a good option for you, Woodward Financials were awarded best wealth management firm in 2021 and again in 2022 we have a team of advisers ready to help you answer these questions and guide you through the right SEIS investment for you.

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