Seed Enterprise Investment Scheme – A Great Deal

HMRC is promoting the little-known scheme (SEIS) and specified investors can utilise a method known as ‘carrying back’ to circumvent paying capital gains tax on investments in enterprises before April 2014.  This is a year longer than expected.
Tax reliefs of 50% on investments of up to £100,000, a capital gains tax holiday meaning tax breaks of up to 78% are available until 2014 on investments and loss relief available for failed ventures, allowing investors to write off more than 100% of capital put into the enterprises.
Sadly, however attractive the Seed Enterprise Investment Scheme seems, take up has been slow.  The main theory for this is that any expected rush to take advantage of such a good deal has been impeded by an investment limit of £150,000, simply because that figure is not always sufficient to sustain a fast-growing start-up.  That limit could potentially be extended, but is by no means guaranteed. The capital gains tax exemption is also limited to April 2014, but again this could be extended a further year.
HMRC said “the facility is intended to stimulate equity investment in seed stage companies by offering a range of tax reliefs to investors in such companies” in recognition of “the higher levels of risk attached to investing in very early-stage companies, and of the particular difficulties encountered by them in accessing equity finance”.
Although their intentions are honorable, HMRC has been very aggressive with their tax avoidance campaigns, therefore, businesses simply do not want to be seen as mitigating their tax.
For many start ups, they do not want to run the risk of being associated with any tax avoidance, no matter how tenuous the link may be.  There is also the issue of funding which many start ups find difficult despite the fact it is eligible.
Promoting an enterprise for investment is heavily regulated too, so despite its eligibility, along with attractiveness to investment , it is far from straightforward.

Due to the above mentioned, it is no wonder that the take up to SEIS has been slow, but there are also a few who would argue that it does not have a place and will not give various start-ups and SMEs the leg-up they need.

Perception is the main problem, but other issues, such as the upper limit and time restraint, may need ironing out if a tangible impact is to be made.