In this edition of the Get Funded! podcast we cover the thorny subjects of:
We covered in a previous edition (subscribe via iTunes if you’ve not already!) the fact that you need to be undertaking a qualifying trade within your company if you wish to raise funding under SEIS / EIS but when is this deemed to start and why is it important?
We need to ascertain the starting point for any trade as this has important ramifications for eligibility under SEIS and it also plays into when form SEIS1 can be applied for and / or the timing of the use of the monies raised.
Frustratingly there is no definition of trading aside from the general observation that it would involve undertaking activities with a view to a profit. But what does this mean in practice?
I have discussed this with HMRC Inspectors and they tend to apply the useful anology of a new shop: whilst the new fittings are being installed and the stock is on order you would expect the sign on the front to say ‘closed’ (it is not yet trading). Once the shop is ready and the sign is turned to ‘open’ then trading has commenced.
So the question for your business is whether you are in a position to accept paying customers? This can get a little hazy for software startups, for example, applying lean startup principles and beta launches etc…
For SEIS purposes, a company must be carrying out a new qualifying trade. For these purposes the trade must be less than two years old. So you must apply the above principles to determine when your trade started. If you are using a company that was incorporated more than two years ago and there has been activity in the company within this timeframe that might point to a trade then this could cause problems. You would be well advised to seek advance assurance from HMRC and to explain the position to ensure that there are no problems. Likewise, if you are acquiring the trade from a third party company then you would need to ensure that it satisfied the two year rule.
When seeking the tax certificates for the investors this can be carried out after 70% of the monies raised has been spent or four months after the trade commenced – whichever is earlier. Again the above principles come into play.
Here in this BusinessN2K podcast we cover (at a canter!) the key tax incentives that are available to support entrepreneurs in building businesses from startup through to exit including:
We’ll no doubt cover each of the above UK Government tax incentives in a separate podcast edition for each – but if you would like to learn more about the SEIS and EIS tax incentives then you can access our dedictated Get Funded! podcast.
Here in this edition of the Get Funded! podcast we cover the essential requirements related to your company and its eligibility for SEIS / EIS funding.
As you might expect for such a generous tax relief, it is not available to all companies – instead it is targeted at small – medium sized companies with the capacity for growth (along with a healthy dose of risk!).
The key company requirements for SEIS / EIS are as follows:
This is a thorny subject that comes up time and time again:
How much of the share capital can I or my investors own under SEIS / EIS?
In this seventh episode of the Get Funded! podcast we cover the (dreaded) “substantial interest” test that basically says that you can’t hold more than 30% of the issued share capital and qualify for SEIS / EIS.
I say “dreaded” because it is not just you or your investor that you need to consider but also any “associates” too. “Associates” include spouses plus parents, children, grand-parents etc (basically blood relations up and down). Brothers and sisters are not counted as “associates”.
Many startup companies get tripped up by this rule so watch out for it!
This episode was brought to you by ip tax solutions – specialists in R&D tax credits
In this episode of the Get Funded! podcast we cover:
Getting your share capital right!
Not every type of share is eligible under SEIS / EIS and given the attractive tax benefits offered to investors, this is little surprise. SEIS /EIS investors cannot receive shares that have preferential rights. They must be – what we like to call –
“Full fat, full risk ordinary shares”
We also cover a couple of pointers to watch out for if you are raising money alongside VCs to ensure that the SEIS / EIS investors don’t lose out and how to avoid losing the relief by accident in the future….
This podcast is brought to you by ip tax solutions | the innovation tax specialists
So essential, in fact, that without it, you could mess up the SEIS relief for your investors before you’ve even really got started!
We also cover the maximum amount that you can raise under SEIS being £150,000 and the importance of getting the order right if raising cash under EIS too i.e. SEIS then EIS and not the other way around.
There are changes afoot around the interaction of these reliefs and the “70%” rule but this merits a separate episode – coming soon….! (Subscribe below ;) )
“Get ready to slice the pie!”
This show is all about the need to issue shares in return for a cash investment if it is to be eligible for SEIS or EIS under current rules.
We also cover what doesn’t qualify e.g. loans, and some tips around types of shares and nominal values of shares to help you get the SEIS share capital structure right from the outset.
Please subscribe and leave us a rating on iTunes – this will help this podcast get found by more entrepreneurs and help the UK get ahead in raising funding for exciting new startups!
All in all this can amount to up to 86.5% tax shelter for the investor so only 13.5% capital may be at risk.
Leave us any comments or questions in the comments section.
A podcast that aims to share practical information and tips on the workings of the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) with entrepreneurs, CEOs and founders.
I am afraid that there is little in terms of bells and whistles in terms of the podcast production at this stage (maybe that’ll come later ;) ), as we are more concerned with getting the information and tips out there as quickly as possible and exploring whether this might be a more digestable medium than text….
Let us know your comments and thoughts.
In this first “Get Funded!” podcast we cover:
This first podcast is really just an initial primer – we will aim to keep them as short and as easy to digest as possible.