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EIS and SEIS side-by-side: how do the tax reliefs differ?

Offering some of the most generous tax reliefs and incentives currently available to UK investors, the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are squarely designed to encourage investment into the UK's startup economy.

And there's little doubt they've done that. Since the EIS launched 25 years ago, approaching £2 billion has been invested via it - and this isn't taking into account the investments made via the SEIS (which, although much younger, saw £175 million invested via it in the 2016/17 financial year alone).

Considered to be very much 'sister schemes' given their close alignment, the tax reliefs and incentives are similar but do have their notable differences - and here we'll explain exactly how they differ, segmented by the tax they relate to.

Income tax

Arguably the most attractive of the tax reliefs and incentives available under both schemes, anyone who pays income tax in the UK would be happy paying a reduced amount of income tax, and both schemes offer investors the ability to do just this.

EIS

  • 30% income tax relief to the value of your investment
  • Requirement to hold shares for three years to benefit from the income tax relief
  • Loss relief at your marginal rate of tax, potentially reducing capital at risk to 38.5%

SEIS

  • 50% income tax relief to the value of your investment
  • Requirement to hold shares for three years to benefit from the income tax relief
  • Loss relief at your marginal rate of tax, potentially reducing capital at risk to 13.5%

Capital gains tax

With many investment assets, returns are realised as a capital gain. As such, capital gains tax is payable on any gain above the tax-free threshold, currently £11,700 for the 2018/19 financial year. Payable at 10% or 20% (since 6th April 2017), it's clear such tax can eat into any potential returns quite considerably - but this isn't the case for EIS or SEIS investments.

EIS

  • Any returns from EIS investments are exempt from CGT liabilities
  • Can defer up to 100% of a CGT liability to an indefinite period in the future by investing all or part of the liability into EIS-eligible opportunities

SEIS

  • Any returns from SEIS investments are exempt from CGT liabilities
  • Can reduce any CGT liability by 50% by investing the full liability into SEIS-eligible opportunities

Inheritance tax

Whilst no one enjoys paying taxes, Inheritance Tax is generally regarded as the least favourable, largely due to the liabilities arising at what can be a difficult point in time. Fortunately, investors into EIS and SEIS don't need to be concerned. 

EIS

  • Any returns from EIS investments are exempt from IHT liabilities
  • Requirement to hold shares for two years to benefit from the income tax relief

SEIS

  • Any returns from SEIS investments are exempt from IHT liabilities
  • Requirement to hold shares for two years to benefit from the income tax relief

Miscellaneous

EIS

  • Can invest a maximum of £1 million each year, rising to £2 million if at least 50% is invested into knowledge intensive companies

SEIS

  • Can invest a maximum of £100,000 each year 

Making tax efficient investments

Through a number of tax efficient investment schemes, the UK government offers some of the most generous tax reliefs and incentives currently available to investors who wish to back the next generation of British businesses.

Suitable for individual investors at all levels - you can access exactly the same reliefs and incentives whether you're investing £100 or £100,000 - investing into startups via the likes of EIS and SEIS can prove to be a fantastic way to mitigate the level of risk in your portfolio.

Driving Growth.
Creating Value.
Delivering Impact.

Backed by

Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.