Thursday, 28 March 2013

Extension of SEIS and EIS Schemes in UK Budget a Welcome Relief for Small Startups

Last week Chancellor George Osborne unveiled the government's UK budget for 2013, one which as is always was received with a mix of indifference and controversy which for the coalition government should be no surprise. Yet there is one area that has received some welcome news and is a cause for celebration. Investors and small startups no doubt cheered with elation when the Chancellor announced a major shake up for the EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme). Essentially the Chancellor has extended the capital gains tax holiday on these schemes aimed at encouraging investors to invest more money into small business startups thereby aiming to nurture entrepreneurial growth.

The SEIS is a scheme that is designed to help small startup companies raise equity based finance by offering tax relief and exemption to investors interested in supporting high risk small scale businesses. Such incentives include tax relief on 50% of the sum invested up to £100,000 as well as exemption from Capital Gains Tax. The notion of wealthy investors having any kind of tax relief might seem an unpopular one but in an age where small businesses face increasing difficulty in staying afloat such incentives can provide that all important lifeline to survival and expansion. The scheme does place certain limits, for example the businesses cannot raise more than £150,000 in equity finance and investors can only have a 30% stake leaving the controlling interest firmly in the hands of the entrepreneur. 
We are delighted to find out that the Seed Enterprise Investment Scheme (SEIS) capital gains tax holiday has been extended - offering investors a further 28% tax relief on their investments in seed and start-up stage businesses. This will continue to ensure that innovative start-ups in Britain have access to private funding they need to get off the ground. - Derek Uittenbroek, Co-founder & CEO FundTheGap
This comes as a welcome relief especially in light of the rise of equity-based crowdfunding largely instigated by the Exeter based platform, Crowdcube which since launching has raised over £5 million for 39 UK businesses of which 97% are eligible for their investors to receive tax relief under the SEIS. Since then the door has opened to equity based crowdfunding internationally with the US government passing the JOBS Act to enable small scale investment in much the same vein as SEIS. More platforms have emerged that specialise including FundTheGap which not only provides a platform for equity based crowdfunding services but also a secure haven with approved entrepreneurs and qualified investors. Derek Uittenbroek, FundTheGap co-founder goes on to say; 
The Chancellor has acknowledged that the system has traditionally favoured debt funding over equity funding. I am pleased to see that Osborne has extended the generous tax reliefs on the See Enterprise Investment Scheme (SEIS) to ensure that start-up businesses in the UK can continue to innovate, create jobs and help boost the UK economy.
Image Credit; Images of Money

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