THE Seed Enterprise Investment Scheme (SEIS) was launched without much fanfare in April this year. Designed to help early-stage companies raise equity finance, it offers tax relief to investors, with the aim of offsetting the reticence some feel about staking their money on a high-risk venture.
Not all small companies qualify, however. Firms must have fewer than 25 employees, less than £200,000 in gross assets, and have received no prior investment from a venture capital trust. A maximum of £150,000 can be raised.
It does offer, however, tangible tax advantages for investors. SEIS allows income tax relief worth up to 50 per cent of the total amount invested. Similarly, the government is offering a capital gains tax holiday in 2012-13 on the sale of any assets that are subsequently invested in a SEIS scheme.
It sounds great. But why do many start-ups face difficulties accessing investment through the scheme? Firstly, the early-stage firm must be worthy of investment (not all are). But secondly, there is the question of matching investor with start-up. The government can offer gentle support, but it can’t act as a dating service.
There is help at hand, however. If you're interested in the scheme, www.seiswindow.org.uk is a good place to start. It has information for both investors and entrepreneurs on how SEIS might work for them. Investors, for instance, don’t have to cast out a net and hope to find a small firm to invest in. Some fund managers offer specific SEIS growth funds, which invest specifically in eligible early stage start-ups.
And companies could apply for SEIS investment through angel investor networks. Unsurprisingly, www.angelinvestmentnetwork.co.uk has a good list of potentials, and could link you up with the ideal new business partner.
SEIS is in its early stages, and it’s not clear that it will be extended beyond April 2013. And with tax relief so few and far between, it may now be time to take full advantage.