The government’s Seed Enterprise Investment Scheme (Seed EIS) helps new companies source venture capital funding to assist in the launch of trading. The way Seed EIS works is by providing tax relief to new investors opting to buy shares in your new business.
It’s possible to receive up to £150,000 in venture capital funding via Seed EIS and your investors will be able to claim tax relief on the money invested. The requirements for applying for Seed EIS include:
– your company must be a new trading business in a qualifying sector
– the business should be established and trading in the UK
– your company should be an unquoted business which is not traded on stock exchanges, and there should not be any plans to launch the business to the stock market or merge/partner with a quoted business
– your business should not control any other company unless that business also qualifies for Seed EIS
– your business should not have more than 25 full-time equivalent employees at the time of application
– if your new company has been in receipt of investments via the Enterprise Investment Scheme (EIS) you won’t be able to apply for Seed EIS
Managing the investments
Once your company receives venture capital funding it should be managed by way of issuing shares in the business, following government guidelines (insert link https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterprise-investment-scheme#about-the-investment).
All funding raised from this investment must be spent on qualifying business activities within three years. Qualifying business activity relates to:
– carrying out new trading in a qualifying venture, which should be specific to your business and should not have been carried out for more than two years by your company or any other company which then transferred the business on to you.
Applying for Seed EIS
It’s possible to get in touch with HMRC prior to making any application for Seed EIS, to receive an advance assurance that your business trade qualifies for this form of investment. You can access the Seed EIS application form on the government website (insert link https://www.gov.uk/government/publications/seed-enterprise-investment-scheme-compliance-statement-seis1).
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