The Ultimate Guide to SEIS Tax Relief and Investment Strategies

SEIS and EIS provide loss relief to reduce your tax. If your investment loses money, you can claim relief. This means you can offset your losses against income or capital gains.

For Unconnected Investors: 

You can offset losses against your income tax. This reduces your overall tax bill.

For Connected Investors: 

You can only offset losses against capital gains, not income tax. You won’t get the same level of relief as unconnected investors.

Steps to Claim:

• Calculate your loss.
• Amend your tax return.
• Submit the claim to HMRC with proof.

Apex Accountant can help you with the claiming process, ensure accuracy, and maximise your tax savings. 

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To claim SEIS benefits, investors must avoid being “connected” to the company. A person is connected if they own more than 30% of shares or voting rights. Also, working as an employee makes an investor connected, but being a director does not. Family members can also make an investor connected if their combined shareholding exceeds 30%.

For example, John with 25% ownership qualifies, but if he owns 35%, he becomes connected. Sarah, a director with 10% shares, qualifies, but if she becomes an employee, she loses eligibility. Family members with 45% shares are also connected.

Need help? Apex Accountants can guide you through SEIS rules. 

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To claim SEIS tax relief, you must meet deadlines. For Income Tax Relief and CGT Reinvestment Relief, claims must be made within five years from 31st January after the investment year. For example, if you invested in 2022/2023, the deadline is 31st January 2029.

If you need to amend a claim, you have 12 months from your tax return filing deadline. For instance, if you filed your 2022/2023 return by 31st January 2024, you can amend it until 31st January 2025.

SEIS also offers carry-back relief, allowing tax benefits to cover two years. Keep good records and follow deadlines to maximise your claims.

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The first step is to get Advance Assurance from HMRC. This confirms your eligibility. Submit a business plan, financial details, and the intended use of funds. After receiving assurance, issue SEIS shares to investors.

Then, submit the SEIS1 form to HMRC. Include share certificates, agreements, and proof of funds. HMRC will process the form and issue SEIS3 certificates, enabling investors to claim tax relief.

The whole process can take a few months.

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SEIS investments offer great tax advantages but come with challenges. SEIS shares are illiquid, meaning they can’t be sold easily before an exit event. Typical exit strategies include:

• Management Buy-Outs: The company’s management buys a controlling stake, giving investors a return.
• Trade Sales: The company is sold to another business in the same industry, offering potential profits.
• Refinancing: New investors join, allowing original investors to sell shares at market value.

SEIS investments usually need to be held for 3-5 years to meet tax break requirements. Expect uncertainty with exits due to market conditions. Plan for the long term.

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The SEIS investment limit has increased to £200,000 per year. This helps investors contribute more and gain bigger tax savings. The company eligibility limits also expanded. The gross asset cap is now £350,000. Plus, companies now have three years to secure SEIS funding.

Startups can raise up to £250,000 through SEIS. This boost helps them grow and hire top talent. SEIS also offers up to 50% income tax relief for investors.

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SEIS has helped raise over £1.5 billion in investments. It has benefited more than 13,000 companies. SEIS supports startups across industries, like tech, energy, healthcare, finance, and education. Companies like Tech Innovations Ltd, Green Energy Solutions, and HealthTech Innovations have used SEIS to grow quickly and attract more investment.

Successful examples of SEIS include,

• Green Energy Solutions saw a 300% increase in revenue. 
• HealthTech Innovations was acquired for £10 million. 
• Eco-Friendly Packaging Co. grew five times in production. 

These examples show how SEIS drives innovation, creates jobs, and boosts economic growth.

Apex Accountants can help your business maximise SEIS benefits. We offer expert advice to make the most of this scheme. 

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To stay SEIS compliant, use funds for business activities like trading. Funds must be used within three years. Avoid sectors like property development or financial services.

Your company must stay independent. No control from other companies. Directors can invest but can’t control too much.

Check assets regularly. Keep them under £350,000. If assets go over, you risk non-compliance.

If you don’t follow SEIS rules, investors lose tax relief. The company may have to repay the relief. Non-compliance can also lead to legal problems.

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