Should you invest in SEIS and EIS investments?
Our first guide on Seed Enterprise Investment Schemes (SEIS) and Enterprise Investment Schemes (EIS) offered an introduction to SEIS and EIS. We will dig a little deeper in to the schemes, providing a more advanced insight.
NB: tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
SEIS and EIS Application Process
Unsurprisingly, since the introduction of the SEIS and EIS, most investors want assurance that the companies they’re investing in qualify. Therefore, it is important to note that not all shares qualify. Shares must be full-risk ordinary shares, as opposed to preferential shares, and as such these shares must be fully paid up at the time of issue.
Whilst it is not necessary to apply for the SEIS and EIS in advance, advanced assurance applications provide confidence that the company has completed everything correctly and act as proof to show potential investors. This can be completed following the first 4 months of trade. However, the company needs to ensure that compliance is continued for 3 years following proof of advanced assurance.
It is important to note that whilst some of the criteria for SEIS and EIS overlap, there are some key differences.
Both SEIS and EIS, company must:
1. Not be controlled by another company
2. Not be quoted on the stock exchange
Only SEIS, company must:
1. Have no more than £200,000 in assets
2. Have fewer than 25 employees
3. Only raise their first £150,000 through SEIS
Only EIS, company must:
1. Have no more than £15m in assets
2. Have fewer than 250 employees
3. Not raise more than £5m per year through EIS
4. Use money raised within 2 years
SEIS and EIS Funds
Whilst SEIS and EIS were originally focussed on encouraging direct investments from individuals, such as angel investors, into companies. In recent years there has been a wider network of SEIS and EIS funds appearing. A SEIS and EIS fund is designed so that a professional managers choose companies for individuals, to invest their money into.
There are two ways in which these funds tend to operate:
1. An SEIS and EIS fund manager will make the investment on your behalf, resulting in the shares ending up in your name. This ultimately means that tax reliefs can only be claimed once the money has been invested into the qualifying companies.
2. Some SEIS and EIS funds have been specifically approved by HMRC, facilitating all the investors tax relief to be claimed when the investment funding round has closed.
What are the Benefits of SEIS and EIS Funds?
By investing through funds rather than directly into a company, the investment is extended to wide variety of companies, which also allows you to spread risk. OFF3R is pleased to announce that it has partnered with Jenson Solutions, Ascension Ventures and Oxford Capital to provide our users with the opportunity to compare and invest in SEIS/EIS funds. However, as with all investments it is important to note your capital is at risk.
Access the Equity Crowdfunding channel on OFF3R for a selection of EIS or SEIS eligible investments.
Originally published at learn.off3r.com on March 12, 2017.