Below is a general summary:
Qualifying investors who qualify for SEIS may benefit from:
Qualifying investors who qualify for EIS may benefit from:
Please note that this is only a condensed summary of the taxation legislation and should not be construed as constituting advice which a potential investor and / or company should obtain from their own investment or taxation adviser. The value of any tax reliefs will depend on the individual circumstances.
Please also note that investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution. It should be done only as part of a diversified portfolio. Any investments are targeted exclusively at investors who understand the risks of investing in early stage businesses and can make their own investment decisions.
For EIS purposes, the value of the gross assets of the company and any subsidiaries must not exceed £15 million immediately before the issue of shares and £16 million immediately afterwards. The maximum EIS fundraising per company is restricted to an all-time maximum of £12,000,000 (£20,000,000 for “knowledge-intensive” companies). Generally, companies older than seven years cannot receive EIS monies. The relevant shares must be issued to raise money for the purpose of a qualifying business activity so as to promote business growth and development. Employing money raised on the acquisition of an interest in another company, which is or becomes a 51% subsidiary of the company, a trade or goodwill or intangible assets employed for the purposes of a trade does not amount to employing money raised for the purpose of a qualifying business activity.
Subject to certain exceptions, the maximum EIS fundraising per company is restricted to £5 million per year and a lifetime limit of £12 million. The maximum number of full-time employees (or full-time equivalent) in the company at the time of investment is restricted to fewer than 250.
For SEIS purposes, the value of the gross assets of the company and any subsidiaries must not exceed £200,000 immediately before the issue of shares. The maximum SEIS fundraising per company is restricted to an all-time maximum of £150,000 and the maximum number of full-time employees (or full-time equivalent) in the company at the time of investment is restricted to fewer than 25.
It is not possible for a company to qualify for SEIS relief if the company has previously issued shares on which EIS relief has been claimed, or has issued shares to, or received an investment from, a venture capital trust. If a company issues shares on which SEIS relief is claimed, it is possible for it to issue subsequent shares on which EIS relief may be claimed.
Most types of trades are qualifying trades for EIS and SEIS purposes but the following are excluded:
For EIS the trade of the company must generally be less than seven years old at the time of investment.
Companies “in difficulty” cannot receive SEIS or EIS investment. In practice, HMRC accept that a company will not be treated as “in difficulty” within three years of its formation or if it is able to raise funds from existing shareholders or the market.
Shares only qualify for SEIS or EIS relief if they are ordinary shares which do not, at any time during the three year EIS or SEIS period, carry any present or future preferential right to dividends (other than to certain fixed rate non-cumulative dividends) or to an company’s assets on its winding up, or any present or future right to be redeemed.
Although it is possible for activities of the company to be carried on anywhere in the world, the company that issues the shares must have a “permanent establishment” (broadly, a taxable presence) in the United Kingdom.
Please note that this is only a condensed summary of the taxation legislation and should not be construed as constituting advice which a potential investor and / or company should obtain from their own investment or taxation adviser.
"Finding experienced advice on the SEIS process was proving very thin on the ground. Sapphire, however, immediately understood our requirements, the time constraints we were bound by and enabled us to get underway straight away. Their service has been excellent and I have no problem recommending them highly."
Guy Bucknall CEO, Gymik Limited
"Working with Sapphire Capital was a most valuable experience. We did not simply get the best financial advice; we got insightful mentorship as well, which for a startup is better than gold."
"Sapphire demystified the whole process of applying for SEIS/EIS advance assurance, were incredibly responsive to any requests we had, and provided a first class service that I have been able to heartily recommend to other technology startups that I work with."
Ronan Cunningham BrainWaveBank Limited
"Sapphire Capital knows the EIS and SEIS investment market. I value their personal service and professionalism. I would highly recommend them."
Peter Burnside Managing Partner, BDO