Home Economy Six SEIS Tax Slip Ups For Start-Up Investors

Six SEIS Tax Slip Ups For Start-Up Investors

The Seed Enterprise Investment Scheme (SEIS) offers some generous tax breaks, but it’s easy for inexperienced investors to lose money slipping up on some tax banana skins.

Financial web site SEIS.co.uk has published some warnings for would-be SEIS investors to watch out for listing the six key points to look out for that could cost money.

Here, Stuart Smith of SEIS.co.uk goes through some of the issues:

  1. Is the investment really a SEIS? – HM Revenue & Customs (HMRC) pre-approves SEIS investments, so check out the deal by calling the tax man to check the investment has genuine approval. Don’t take paperwork at face value as documents are easy to forge – always check with the independent source.

  1. Timing is everything – A SEIS is a fixed-term investment t that ties money up for three years.  Pulling cash out early means losing tax reliefs that may have been claimed already

  1. Keep an eye on your money – If you do not have a seat on the board, make sure someone independent who will report back to you has. If the company switches direction and loses SEIS status, then investors lose their tax breaks

  1. Tax plan for dividends – Any dividends on SEIS shares come with income tax attached, so make sure you know if dividends are likely to be paid and how much a share so you can tax plan

  1. Conditional CGT relief  – Disposing of SEIS shares comes with a CGT exemption – providing the shares have been held for three years

  1. Sham SEIS deals – HMRC will withdraw tax breaks if they think the SEIS is just a scam to avoid tax

“SEIS also comes with a raft of qualifying rules for companies seeking investment and HMRC has made clear that checking out a company falls within the SEIS criteria is part of the due diligence the investor should carry out,” said Smith.

He also explained legal and other fees involved with proper due diligence could add up to 10% to the cost of investing in a SEIS and are charges that are not subject to tax relief within the scheme.

“The benefits of investing in a SEIS company are considerable – but so is the downside of provoking the wrath of HMRC by not following the strict investment rules,” said Smith.

“That’s why detailed due diligence is so important before handing over any cash.”

Saeed Maleki
Saeed Maleki
As the former co-founder of "Yazd Zamaneh" publication (زمانه یزد), Maleki is one of the most experienced reporter working for Pars Herald. Saeed started Zamaneh in cooperation with two local publications on 2007. Two years later he closed his news corporation due to post-election protests in which he was accused of agitating people to demonstrate against Iranian government. On the same year he joined Pars Herald Group as the Economy writer. He is currently studying in Yazd's Payam Nour University perusing his bachelor degree. City: Yazd Phone Number: +989127906398 Email: Saeed {at} ParsHerald.com Name in Persian: سعید ملکی

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