June 14, 2024 Reviewing Enterprise Investment Schemes
In the tax year ended 5 April 2023 London and the South East accounted for 65% of both Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) funds raised. Perhaps unsurprisingly, the highest percentage of investors in EIS and SEIS schemes were also drawn from the same regions. That’s according to statistics published by HM Revenue & Customs on 23 May 2024.
Regarding total investments in the two schemes, the levels seen were slightly down on the previous year. However, HMRC point out that this fall is partly due to the totals in the 2021/22 period being higher than previously seen due to a post-Covid bounce-back. While it is early days, initial HMRC figures for the 2023/24 period indicate that a further fall in numbers may be seen once all applications are in.
By far the greatest proportion of EIS and SEIS applications fall within the information and communication sector; with professional scientific and technical companies, manufacturing companies, and companies working in the wholesale and retail trade and repairs sector taking the next three places.
What are the main differences between EIS and SEIS schemes?
- SEIS schemes are targeted at start-ups and early-stage businesses which have been trading for less than three years. EIS schemes aim to benefit longer-established companies that have been trading for up to seven years, or ten years if classified as a knowledge-intensive company (KIC).
- The maximum number of employees is 24 for a SEIS, 249 for an EIS or 499 for a KIC company.
- The maximum amount that can be raised in one year is £250,000 for a SEIS, £ 5 million for an EIS, or £ 10 million for a KIC. Interestingly in the year 2022/23 4% of EIS applications accounted for 27% of investments. When it came to SEIS schemes, 41% of applications looked to raise more than £100,000.
What are the prime criteria for EIS and SEIS applications?
The company must:
- have a permanent establishment in the UK.
- not be listed on any stock exchange at the time of application.
- not be controlled by another company.
- carry out a qualifying trade.
Whilst the above are the prime criteria for applications into the schemes, there are many other requirements that companies have to adhere to if they are to make a successful application. It should be noted that in the 2022/23 year only 81% of EIS and 82% of SEIS applications were approved. Elemental can provide advice and guidance to help investors and the companies in which they invest in to take full advantage of the tax reliefs available under the two schemes. If you are interested in discussing your EIS or SEIS application, please don’t hesitate to get in touch.
