The next step

A comparison on the SEIS and EIS tax reliefs and conditions

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Raising SEIS and EIS funding at the same time

SEIS and EIS recap

The seed enterprise investment scheme (SEIS) and enterprise investment scheme (EIS) are similar, both encouraging investment in potentially high growth companies by offering a collection of generous tax reliefs (see The next step ). However, the SEIS tax reliefs are more generous than the EIS ones which makes it even more attractive to investors. The problem is that you can only raise £150,000 under the SEIS compared with up to £5m per year (and £12m over the lifetime of the company) under the EIS. So, if you need to raise more than £150,000, is there a way to take advantage of both schemes?

Dual application

You can apply for both schemes, but it is important to get the order right. A company looking to raise finance using both the SEIS and the EIS must raise investment first using the SEIS before moving on to the EIS assuming all the relevant conditions are satisfied. If a company issues shares under the EIS then it is no longer possible to go back and issue shares under the SEIS. However, it is possible to apply for both the SEIS and the EIS at the same time. In fact, there are many companies that choose to raise funding under the SEIS and the EIS in this way. This means that once the company passes the £150,000 SEIS limit they will almost immediately be able to move on and raise additional funds of up to £5,000,000 or more using the EIS.

Example

Company X decides to raise £300,000 on an investor portal such as Crowdcube. The first £150,000 invested is potentially SEIS eligible. The additional £150,000 invested is potentially EIS eligible.

After the investment period ends, potential investors would be allocated the SEIS shares on a first come, first served basis with the remaining investors offered EIS shares after the initial SEIS limit is used. In some cases, investors may wish to subscribe for shares in both the SEIS and the EIS.

Tip. If you intend to raise finance in this way, you need to make sure that you comply with HMRC’s rules. HMRC’s guidance states that EIS investments must be raised at least one day after any SEIS investments. Therefore, you will need to issue the share certificates for the SEIS investments at least one day before you issue the shares for the EIS investments.

Tip. If an individual investor makes two investments in the same pitch, one before and one after the remaining SEIS allowance has been exhausted, they will need to be treated as separate investments. This means that the shares for the SEIS and EIS investment will need to be issued on separate days and the investor will receive two separate share certificates.

Tip. Shares must not be issued until after they have been fully paid for. Therefore, you need to ensure that your company has a way to accept payment before any shares are issued.

For a comparison of the SEIS and EIS tax reliefs and conditions, visit https://www.tips-and-advice.co.uk , Download Zone, year 13, issue 11.