Despite some skepticism over the potential benefits of the Seed Enterprise Investment Scheme (SEIS), the government has announced SEIS has positively impacted more than 1,000 businesses across the UK. According to figures released by the Treasury, the programme has raised over £82 million in finance for small, early stage companies. Although initial take-up of the tax relief scheme was somewhat slow going, it has grown in popularity to the point that an average of £1.3 million of funding is now being raised by 19 companies every week – all made possible through the SEIS.
The scheme offers angel investors a generous income tax relief of 50 per cent, with no capitals gains tax on profits made from investments at or below the £150,000 threshold. Additionally, SEIS allows investors to reclaim the entirety of their tax paid for the 2012-13 tax year, on the proviso that they reinvest that money into a fledgling business in the UK. George Osborne sees this as an effective way to reward people who support entrepreneurs in the UK. Additionally, he hopes the SEIS will transform the UK into “the best place in the world to start, finance and grow a business”.
Since its launch last year, over 1,100 small, early stage companies have benefited from the scheme. These small companies have used the funding to grow and expand, to promote financial stability within their businesses and increase profit margins.
Take-up has been higher than expected, as fewer than 400 businesses officially registered interest in the programme with Her Majesty’s Revenue & Customs.
The chancellor has said he is “delighted” so many start-ups have taken advantage of the programme. Ahead of a visit to a small, East Anglian company which has received funding through the scheme, Mr Osborne said: “The UK is full of budding entrepreneurs who have struggled to realise their ideas because of problems accessing finance… These measures (SEIS along with Start Up Loans and The Business Angel Co-Fund) will help start-ups that create jobs, opportunities and wealth in Britain and are a key part of our economic plan.”
The SEIS builds on the long-standing Enterprise Investment Scheme, which offers tax breaks for investors in small, high-risk companies.
According to the chancellor, plans are in place to promote business growth even more, with the potential to benefit all companies, big or small, new or well-established, across the UK. “Next year we are going further by introducing an employment allowance,” said Mr Osborne, “cutting up to £2,000 off every business and charity’s National Insurance Contributions bill.”
Although accountants advise caution before jumping into the SEIS, many now agree that it is an effective tool for investors to back small businesses. However, the right circumstances are necessary, and the SEIS may not benefit everyone. To determine whether or not the SEIS is right for you, or how your small business can get involved, talk to your accountant. If you are thinking of becoming self-employed and launching your own small business, the SEIS may provide you with the funding you need to get your company off the ground.
I am a chartered tax advisor with a specialism in the freelance contractor sector advising contractors on how to structure their affairs and recruitment businesses and end hirers on the effective…
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