The MoneyLab Blog

Issuing SEIS and EIS shares - 4 key considerations

Posted by Vasiliki Carson, Sapphire Capital on 31-Aug-2017 15:43:53

So, you successfully obtained SEIS and EIS advance assurance from HMRC and successfully raised your “risk finance” capital. Congratulations are in order, as achieving all of this is a lot of hard work! Before you pop open the champagne, however, you must ensure that you correctly issue the SEIS and EIS shares, as errors in share issuance can put all your hard work in jeopardy. (Grab a cup of coffee instead and read on, as there is still more work to do...)

Share issuances cannot easily be amended once filed and may result in your investors not being able to avail of the Enterprise Investment Schemes. If investors aren’t able to avail of the SEIS / EIS tax incentives, you may end up losing the finance promised to you.

Here are some guidelines to keep in mind when you are about to issue SEIS and EIS shares:

 

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Topics: SEIS

What is a SEIS qualifying company?

Posted by Boyd Carson, Sapphire Capital on 03-Mar-2017 18:36:06

 

We are often asked which companies qualify for SEIS. Below is a brief summary of the requirements.

Each Company must initially (i.e. at the time of issue of the shares) not be listed on a recognised stock exchange (as defined for the purposes of SEIS Relief) and there must be no “arrangements” in place for it to become so listed. In addition, throughout the three year SEIS period, it must not be a subsidiary of, or be controlled by, another company. It must either exist to carry on a qualifying trade or else be the parent company of a trading group and there must be no “arrangements” in existence for the Company to become a subsidiary of, or be controlled by, another company.

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Topics: SEIS

Autumn Statement 2016 Implications for SEIS, EIS, and SITR

Posted by Vasiliki Carson, Sapphire Capital on 24-Nov-2016 11:33:42


We were eagerly awaiting to hear the 2016 Autumn Statement in order gain some insight as to how the government proposes to deal with the resulting market uncertainty created by the Brexit referendum, and what the new prime minister and her cabinet are seeking to achieve.

The main take-away points were:

  1. Productivity of the UK workforce is a main focus for improvement, and the government plans to do this by creating a £23 billion Productivity Investment Fund to promote innovation and infrastructure; the money is to be used primarily for housing, transport, telecoms and R&D projects. This funding will flow through the British Business Bank in order to improve prosperity and commerce in regions outside London, and in particular for the North of England.
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Topics: EIS, SEIS, SITR

SEIS / EIS advance assurance for foreign companies - is it really possible?

Posted by Boyd Carson, Sapphire Capital on 14-Jun-2016 15:24:19

 

Short answer: yes it is. At Sapphire we are increasingly being asked to obtain SEIS and or EIS advance assurance for foreign-based companies. Contrary to popular belief, this is a popular structure. We recently obtained SEIS and EIS advance assurance for a company based in Malta (link to example), EIS advance assurance for a company in the United States (link to example) as well as one based in the Netherlands (link to example).

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Topics: EIS, SEIS

Structuring SEIS, EIS and SITR funds - current issues

Posted by Nick Rutter, Maclay Murray & Spens LLP on 13-Apr-2016 16:47:36

As the latest wave of EIS and SEIS offers subsides, and we enter the new tax year, we look back at some of the issues we have come across while advising our clients on setting up investment structures in this space:

Stand-alone or fund?

Economies of scale will often mean that a fund is a cost-effective approach where a stand-alone offer for a single corporate would not be, particularly in the SEIS space.  However, given that the maximum raise under EIS is now £5,000,000, there can be times when a single company EIS offering makes sense – particularly given AIFMD issues.

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Topics: EIS, SEIS, SITR

Can a founder claim EIS or SEIS relief?

Posted by Violet Spence, Sapphire Capital on 30-Mar-2016 12:25:14


At Sapphire Capital Partners we meet many entrepreneurs who have great business vision and are keen to pursue their ideas through one of the business tax incentive schemes; Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS), or Social Investment Tax Relief (SITR).

One of the areas where we are frequently asked for advice and guidance is in the area of founder shares, and more precisely, can the entrepreneur or owner of the company benefit from the above mentioned tax schemes?

And the answer to this is that it all depends on your relationship with the company, with the key question being, “Are you connected with the company?”

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Topics: EIS, SEIS

Why SEIS / EIS Inheritance Tax Relief should matter to you now

Posted by Vasiliki Carson, Sapphire Capital on 26-Jan-2016 11:06:13

 

You may have seen my video blog on Sapphire’s website where I give a high level overview on the incentives offered by the Enterprise Investment Scheme (“EIS”) and the Seed Enterprise Investment Scheme (“SEIS”).  I now want to delve into a little bit more detail on their Inheritance Tax Relief (“IHT”) incentive as David Bowie’s carefully orchestrated departure from our world got me thinking a little more about the importance of planning for the end. Because we all know that death and taxes are unavoidable, the relief offered by the schemes on estates makes investing in these products relevant to a much wider population than what you might have originally thought. 

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Topics: EIS, SEIS, EIS tax reliefs

SEIS and EIS - what trades are excluded?

Posted by Violet Spence, Sapphire Capital on 14-Dec-2015 14:08:00


The Enterprise Investment Scheme (EIS), and Seed Enterprise Investment Scheme (SEIS) offer very attractive benefits to investors. Investors can only claim tax relief if the company meets certain conditions, one of these being the type of business which it operates.  

We are often asked for our advice on whether a business will qualify for these tax reliefs and with our wide experience in this area we can offer our view based on our past clients and dealings with HMRC. The rules laid down by HMRC give an overview but not all businesses fit neatly into them, and there will always be grey areas.

Most trades qualify but there are a number of excluded activities in each of these schemes. It is important to remember that activities are only excluded if a substantial element of the company’s trade consists of the ‘excluded’ activity. There is no formal definition of ‘substantial’, but a general rule is no more than 20% of the trade. This 20% benchmark applies to the company as a whole, so the parent company may well qualify for SEIS or EIS status whilst a subsidiary may not.

So let’s look at what the rules currently dictate for trades excluded from EIS and SEIS: 

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Topics: EIS, SEIS

EIS, SEIS & SITR - the 2015 Autumn Statement changes

Posted by Violet Spence, Sapphire Capital on 27-Nov-2015 08:46:41


There are many of us who had hoped that the Autumn Statement would bring an announcement on the widening of the SITR scheme and would herald an increased investment limit and an expansion of the activities permitted under this scheme. Unfortunately this was not the case, with only one change relevant to the venture capital schemes being announced.

But it was not a change that we were expecting! 

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Topics: EIS, SEIS, SITR

EIS, SEIS & SITR, what can go wrong?

Posted by Violet Spence, Sapphire Capital on 23-Sep-2015 09:04:12


Why invest in an Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), or Social Investment Tax Relief (SITR) company?

Well along with the desire to see the start-up company succeed there is also the attraction of the healthy tax reliefs offered by such investments /blog/tax-schemes_comparison

But what should you watch out for?

We recently met with HMRC and they outlined the common pitfalls which are encountered for EIS and SEIS and SITR companies and investors.

Believe it or not, one of the reasons why companies fail to maintain their tax status is shares not being fully paid up on issue. We look at this requirement along with other failings noted by HMRC.

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Topics: EIS, SEIS, SITR

SEIS tax relief - the six main tax reliefs explained.

Posted by Boyd Carson, Sapphire Capital on 21-Aug-2015 13:53:06


Every day at Sapphire Capital we talk with numerous entrepreneurs who are setting up companies and one of the most common questions they have is what are the Seed Enterprise Investment Scheme ("SEIS") tax reliefs and can their new enterprise obtain them for potential investors? This is a great question and an important one for any entrepreneur who is seeking to raise finance for their company.

Although at Sapphire we specialise in SEIS, EIS and SITR, that does not mean that we always recommend that obtaining SEIS (or EIS) advance assurance is the right thing to do.

This blog article will seek to (1) explain the six main tax reliefs, (2) give directions as to how a company can obtain these reliefs for itheir investors as well as (3) assisting business owners in deciding whether obtaining SEIS advance assurance is right thing to pursue.

The six main tax reliefs are as follows:

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Topics: SEIS

10 reasons why your low budget film production will never get financed

Posted by Phil Taylor, Film Engine Limited, London on 11-Dec-2013 13:21:00

Out there in our wonderful but often difficult world there are millions of would-be filmmakers, some with just great ideas, others with the capacity to write a script and perhaps as you’re reading this you are, or know, one of them. But for every 100,000 scripts only a tiny percentage ever get made. Why is that? Hopefully my experience and feedback will help show you why with some simple and common sense tips. 

Problem One: “I’ve written a blockbuster!”

You think your script is the best thing since ‘sliced bread’ and cannot understand why hardly anyone else thinks like you do.  Solution - get a top professional to review your script and seek plenty of input from your peers. Find another writer who has had their film financed and ask them to review it. Try to use someone with a similar genre outlook.  Get as many reviews as you can.

Problem Two: Genre “It’s a horror, Sci fi with a romantic twist set on a desert island which is invaded by pirates and comical CGI dinosaurs set in ancient China with kick boxing elephants….”

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Topics: EIS, SEIS, Film SEIS, Film

EIS Tax Reliefs Explained - Part Two - Capital Gains Tax Reliefs

Posted by Boyd Carson, Sapphire Capital on 10-Aug-2013 20:41:00

This is the second part in a series of blog articles about EIS tax reliefs.  In the first article I covered tax reliefs that are available for income tax.  In this article I shall cover the capital gains tax reliefs.  Just to remind you there are six important EIS tax reliefs, all of which I will cover in a series of blog articles as follows:
  1. Income Tax Relief (see "Part One - Income Tax Relief").

  2. Capital Gains Tax Re-investment Relief (this article).

  3. Capital Gains Tax Exemption (this article).

  4. Loss Relief against Income or Capital Gains (this article).

  5. IHT Relief and Business Property Relief (future article).

  6. Business Investment Relief (future article).

In this second article, I will cover the Capital Gains Tax reliefs.

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Topics: EIS, SEIS, EIS tax reliefs, EIS Capital Gains Tax

HMRC EIS pre approval - 10 things you must include

Posted by Boyd Carson, Sapphire Capital on 06-Aug-2013 21:45:00

At Sapphire Capital we have carried out many Enterprise Investment Scheme ("EIS") and Seed Enterprise Investment Scheme ("Seed EIS") advance assurance applications to HMRC.  This has primarily been for clients (and for ourselves) in a diverse range of trading activities such as technology, renewable energy, construction, restaurants, shops, nurseries etc.  Over the years we have learned through experience that there is certain information that is required to be submitted to HMRC on making the application, otherwise HMRC will most likely come back and ask for more information.  Any delay can add weeks to the application process.  It is important to get it right the first time as many investors will not invest in a company unless the company has received advance assurance from HMRC.

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Topics: Seed Enterprise Investment Scheme, EIS, EIS Schemes, SEIS, EIS tax reliefs

Peer to Peer Lending or Equity Crowdfunding - which is right for you?

Posted by Michael McDowell, Sapphire Capital on 01-Aug-2013 21:33:00

As the number of crowdfunding platforms and providers continues to grow in the UK the key question is - which one is right for you?

It is clear that crowdfunding is now becoming very specialised - with different crowdfunding websites focusing on niche areas and as a result we are seeing a process of differentiation within this business sector.  In this blog I will attempt to explore in more detail two of the most important of these sectors for the entrepreneur - being peer to peer lending and equity crowdfunding.

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Topics: EIS, investing, seedrs, crowdcube, assob, uk, peer to peer lending, SEIS

Budget 2013 - SEIS - Capital Gains Tax Changes Explained

Posted by Boyd Carson, Sapphire Capital on 22-Mar-2013 23:28:00

SEIS investors got a welcome boost from the chancellor George Osbourne in the 2013 budget.  In his budget speech, the chancellor extended the capital gains tax re-investment relief on SEIS. As a result, any investor into a SEIS during the tax years 2013/2014 will receive 50% capital gains tax relief when they re-invest those gains into SEIS companies in either the 2013/14 or 2014/15 tax years.  The announcement of the 2013 budget is a welcome boost for startup companies. 

A Brief Summary of SEIS

SEIS offers tax relief to investors in smaller, higher risk companies, in order to help them raise finance.  SEIS offers unbeatable tax reliefs and allows investors to invest in startups with a reduced downside risk.

In order to attract SEIS funding, the company must:

  • Employ 25 people or less.
  • Be no more than 24 months old.
  • Have less than £200,000 in assets.
  • Meet the "qualifying trade" rules.
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Topics: Seed Enterprise Investment Scheme, SEIS, 2013 Budget

Seed Capital Required for a Startup? 10 Reasons to use a Seed EIS

Posted by Boyd Carson, Sapphire Capital on 25-Feb-2013 21:39:00

Seed capital is normally defined as the first money into a company in order to start it.  Typically it is used to pay for expenses such as product development, marketing costs and sundry costs incurred at startup, including legal fees and company registration expenses. We have been involved with many startups over the years and in our experience, it always costs more to fund a company in the startup stage than originally planned. Estimated costs are normally on the low side to actual reality. So raising enough seed capital at the beginning is vitally important. If you don't raise enough, you risk having to go back for more, the "second round". This may have the result of diluting your own shareholding as well as the friends and family who may have helped you out the first time round. Often investors in the second round will realise that you need the money in order to survive and are therefore in a position to take advantage of your situation.

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Topics: Seed Enterprise Investment Scheme, SEIS, Alternative Investments, Seed Capital

Business Investment Relief Explained - a 10 point summary guide

Posted by Boyd Carson, Sapphire Capital on 05-Feb-2013 23:22:00

Unfortunately for the vast majority of us, when we earn money we have to pay tax.  We then have a choice to either spend or invest the remainder. However, for those individuals who are resident in the UK but are considered non-domiciled this basic rule does not have to apply in certain circumstances.  From 6 April 2012, the government introduced the very attractive Business Investment Relief ("BIR") - a kind of turbo charged Enterprise Investment Scheme ("EIS") for non-UK domiciliaries.

Put simply, if you are resident in the UK but are Non-UK domiciled (i.e. a "non-dom") and you want to bring your overseas money into the UK to make an investment and NOT pay tax in the process - then Business Investment Relief is your answer.

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Topics: Seed Enterprise Investment Scheme, EIS, EIS Schemes, SEIS, Business Investment Relief

EIS / SEIS Invest in someone and a sector you believe in

Posted by Michael McDowell, Sapphire Capital on 29-Jan-2013 11:05:00

For businesses hoping to grow and expand, the options to raise capital are limited.  To many, Enterprise Investment Schemes and Seed Enterprise Investment Schemes can be a very effective way to solve the capital raising problem.  Likewise, investors with large tax liabilities view EIS and SEIS very favourably.

At the minute though, most investors hear about EIS/ SEIS schemes from their accountant, wealth manager/ IFA or the scheme promoter themselves.  

A nicely printed brochure or more usually a scruffy print out is handed across along with a pitch - with the proviso, "well, if the company doesn’t work out at least you'll get the tax benefit".  The brochure is usually a difficult read as the FSA make certain demands- that are important to protect the investor - but they do little to illustrate the merits and finer points of the investment.  Subsequently to raise all funds required can be a long and difficult process.

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Topics: Crowdfunding, EIS, EIS Schemes, SEIS, Alternative Investments

Seed Enterprise Investment Schemes (SEIS) - 10 Reasons to Invest

Posted by Vasiliki Carson, Sapphire Capital on 18-Dec-2012 16:33:00

Seed Enterprise Investment Schemes (SEIS) - we love them. Every entrepreneur I know does and I meet a lot of them. And why wouldn't they? Introduced from the 6 April 2012, the SEIS offers entrepreneurs an excellent way to attract investors to risk their capital to start a new venture and we know from experience that it is hard to raise capital right now for profitable existing ventures, let alone new startups. Anything that helps an entrepreneur to raise capital (assuming it is a good investment) must be a good thing.  The banks are certainly not taking any risks for the foreseeable future so the SEIS is an important means by which entrepreneurs can attract investment.

What are the advantages of the SEIS to the investor?


Below I have listed what I consider to the be the top 10 benefits of the SEIS to the investor:

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Topics: Seed Enterprise Investment Scheme, SEIS