The SEIS (Seed Enterprise Investment Scheme) was introduced by the government in 2012 to incentivise investment in start-ups. In return for backing the youngest – and hence riskiest – ambitious companies, investors can receive significant tax reliefs. To date, more than 10,000 companies have raised £1.5 billion under SEIS (2012/13-2020/21).
Recently the government announced it was going further and now intends “to provide a boost to start-ups and young companies by widening access to the SEIS and increasing the funding limits, encouraging additional investment and so further supporting the growth of these early-stage companies”.
Under the terms of the new scheme, the SEIS limits became effective on 6 April 2023. As far as small and growing businesses are concerned, more flexible rules for SEIS companies will have an impact by allowing higher limits and more flexible qualifying rules for companies raising funds under SEIS. This means you could potentially invest in relatively more mature and better capitalised companies under SEIS: remember however these are still very high risk investments.
From 6 April 2023, companies can:
- Raise funds under SEIS within three years of trading (previously two years)
- Raise up to £250,000 under SEIS (previously £150,000)
- Have up to £350,000 in gross assets (previously £200,000) and still qualify for SEIS
The news came in the wake of UK entrepreneur group calling on the government to make improvements to both the SEIS and the Enterprise Investment Scheme (EIS) in order to better support tech startups.
A recently released report, from the All-Party Parliamentary Group for Entrepreneurship, said that SEIS and EIS were essential components in growing the UK tech economy.
However, the government needs to do more to support them, the report said, including improving communication between HMRC and the startup and investor community.
“The EIS advance assurance team at HMRC should be given the resources it needs,” said the report.
It stated that the tax department should be in contact with the early-stage tech community to ensure “good companies do not fall through the cracks”.
Specifically, the report requested that HMRC should give companies applying for the tax incentive scheme a timeline and a response to all questions.
“HMRC should also be able to contact startups and investors with clarifying questions about their advanced assurance applications, which ought to speed up the process,” the report noted.
The report also recommended reforming financial health eligibility rules. It said that under the current system, applying companies need to have “more assets than liabilities and, if raising funds outside of its initial investment period, to still have more than half of its invested capital”.