SEIS rules set to change
SEIS is a great tax incentive scheme. It really helps early stage businesses to secure all important start-up funding by offering very attractive tax breaks to investors. That said, a company can only secure £150,000 under this scheme and if more funds are required they would have to raise further funds through SEIS’s bigger brother, EIS. But this hasn’t always been easy as the rules stated that you had to spend at least 70% of the money raised under SEIS, before proceeding to EIS.
The new rules are less confusing. There are no restrictions on spending the first tranche of money, and SEIS & EIS funding can be dealt with at the same time. But how is this likely to help businesses looking for investment? When it comes to securing investment, momentum is key. You spend months preparing for the funding round then even longer campaigning for the investment itself. With all the noise you’re making, investment starts to trickle in then, with a fair wind, it starts to flow and the last thing you want as a business is to have to stop that flow until you’ve spent some of the cash. You lose momentum on the deal and all the excitement you’ve built up in the investor community fizzes out and you’re back to square 1 and still trying to close your round.
Being able to switch straight to EIS is definitely a good thing and should galvanise investors to invest quicker, after all, the first £150,000 to come in gets a very neat tax break.
By Roderick Beer
COO, Rufffena Capital
To find out more about securing investment: http://www.ruffena.co.uk/
To find out more on SEIS: https://www.gov.uk/seed-enterprise-investment-scheme-how-companies-qualify
To find out more about the change: https://www.gov.uk/government/topical-events/budget-2015