Company and Financial Law

HM Treasury sets out draft SEIS legislation in the Finance Act 2012

We reported last week on the Chancellor’s announcement in his Autumn Statement of a new tax-advantaged scheme to encourage investment in start-up business, to be called the “Seed Enterprise Investment Scheme” (the SEIS). HM Treasury has today published the draft Finance Bill 2012 containing details of the SEIS and its operation. The SEIS will, in the Treasury’s description:

“- apply to smaller companies, those with 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business;

- give income tax relief worth 50 per cent of the amount invested to individual investors with a stake of less than 30 per cent in such companies, including directors who invest in their companies;

- apply to subscriptions for shares, using the same definition of eligible shares as EIS (which it is proposed will be widened in Finance Bill 2012);

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SEIS will give tax relief of 50% for angel investors in start-up companies

The Chancellor today announced in the Autumn Statement that a new scheme to encourage investment in start-up companies will be introduced.  The “Seed Enterprise Investment Scheme”(SEIS)  will provide tax relief of 50% for individuals who invest in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000.

There will also be a capital gains tax holiday for investments made into the new scheme.  This will provide a capital gains tax exemption on gains realised on disposal of an asset in 2012-13 and invested through the SEIS in the same year.

What type of company will be a “qualifying company”?  There is no further information in the Autumn Statement, but there are – perhaps – some clues in the consultation paper that the Treasury published on 6 July 2011 on the proposed  introduction of the SEIS.  That consultation paper suggested that the proposed scheme (then called “BASIS”) would apply to pre-trading companies,  attempted to define a “business angel”, and also suggested that any investment would have to be principally in the form of equity or quasi-equity.  See our post of 6 July 2011 for more details.

This Financial Times article has accountants Blick Rothenburg describing the level of the SEIS tax relief as “astonishing”.

UPDATE 6 December 2011: The draft Finance Bill 2012 has now been published by HM Treasury, setting out the details of the SEIS and how it will operate – see this post.

The Enterprise Investment Scheme and Venture Capital Trusts

The Autumn Statement also confirmed that:

“The Government will also simplify the EIS by relaxing the connected person rules and the definition of shares that qualify for relief. The Government will tighten the focus of the schemes by introducing a new test to exclude companies set up for the purpose of accessing relief, exclude acquisition of shares in another company and exclude investment in Feed-in-Tariffs businesses. In addition to these changes that were consulted on, the Government will remove the £1 million investment limit per company for VCTs to reduce the administrative burdens of the scheme.”

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