A guide to SEED EIS and how it can help fund your start up

/ Posted By - Bradleys Accountants / Categories - Business start-ups

Researchers say that 8 out of 10 small businesses close within the first 2 years of trading. A massive 80% crash and burn!

But why?

The main contributive factor for this is due to insufficient cash-flow as a result of the following:

Running out of money is a result of poor planning. As a business, there are various funding options available to you.

Conventional business funding options

For the first three listed above, you will have ongoing maintenance payments so may not be ideal for some new companies.

There are other alternative funding options. For example:

Most of the above options will insist on receive profitability and cash-flow forecast.

Those interested in the investor route may want to consider the government backed Seed Enterprise Investment Scheme to make their company more attractive to investors.

History of SEIS

The Seed Enterprise Investment Scheme (SEIS), introduced in the Chancellor George Osborne’s 2011 Autumn Statement, is a tax-friendly financing scheme allowing start-ups to find a route to equity finance. It offers great tax efficient benefits to investors in return for investment in small and early stage start-up businesses in the UK.

Some benefits for investors:

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    SEIS eligibility criteria

    As with all tax schemes, the following criteria must be met by the company.

    Sectors excluded from SEIS

    Most trade like Retail and Health & fitness qualify. However, the company must also not be an excluded trade. Some examples:

    There are additional excluding trades and a list can be found here: https://www.gov.uk/guidance/seed-enterprise-investment-scheme-how-companies-qualify

    SEIS Investors criteria

    Investors must meet some criteria in order to qualify for the benefits received through investing via SEIS. They are the following:

    When determining if the investor has more than 40%, associated persons must be included. For the purpose of associated people the following would apply:

    Summary

    People with existing businesses can start new companies for new ventures that they might have as long as the trade isn’t the same as the previous organisation. There are various rules to consider before you can apply with the SEIS scheme. It’s recommended you speak to us before setting up any companies as the business owners may be entitled to SEIS tax relief on their shareholding if they structure the setup correctly.

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