What SEIS changes have been made, and when they come into full effect?

The Seed Enterprise Investment Scheme (SEIS) is a government-backed tax scheme introduced by the UK government that provides tax reliefs to investors who invest in high-risk, very early-stage companies. The scheme was introduced in 2012 to encourage investment in startups and help them raise the capital they need to grow and develop.

Since its introduction, SEIS has been a popular way for investors to support new businesses and benefit from generous tax reliefs. However, the scheme has undergone some changes as of the 6th of April 2023 that investors and startups should be aware of.

The changes to SEIS include the following:

Increased investment limit 

One of the most significant changes to SEIS is the increase in the maximum investment limit for investors. Previously, investors could invest up to £100,000 per tax year in SEIS-eligible companies. However, this limit has now been raised to £200,000 per tax year, providing investors with even more opportunities to support startups and benefit from SEIS tax relief.

Increased fundraise limit 

Another significant change to SEIS is the increase in the maximum investment limit for companies raising under SEIS. Previously, companies could invest up to £150,000 under SEIS. However, this limit has now been raised to £250,000 in SEIS investment, allowing companies to benefit from additional SEIS investment. 

Longer qualifying period

Another change to SEIS is the extension of the qualifying period for companies. Previously, companies had to be trading for less than two years to be eligible for SEIS. However, this qualifying period has now been extended to three years, providing more companies the opportunity to benefit from the scheme.

Note: although SEIS changes have come into effect on the 6th of April 2023, the bill will receive Royal Assent in July 2023. Be aware, as per the EIS Association (Enterprise Investment Scheme Association) website explains, “HMRC will not be able to provide advance assurance or approve SEIS1 submissions for the increased limits until the Finance Bill is substantially enacted and receives Royal Assent.” therefore:

• All advance assurances will be under the old rules until the Royal Assent in July.
• SEIS advance assurance and SEIS1’s under the new rules will not be allowed until after the royal ascent in July 2023.
• Companies and investors can raise under the new rules; however, the SEIS1 compliance statements must wait until royal ascent is obtained. 
• Suppose a company is fundraising both SEIS (under the new rules) and EIS. In that case, it is crucial the company does not make an EIS1 compliance statement submission until the Royal Ascent has been obtained and the Company’s SEIS1 compliance statement has been submitted to HMRC. From now until Royal Ascent has been received, this is a BIG pitfall that all companies raising under both SEIS and EIS should be aware of. 

It is important to remember the changes to SEIS are designed to provide more opportunities for investors to support startups and for startups to benefit from additional funding. However, until the bill obtains Royal Ascent, there are some pitfalls and inconveniences to be aware of. The fact of the matter is that companies eligible for SEIS can raise £250k now, but will have to wait to do the HMRC paperwork in July.