Six months in, we are starting to see increasing activity in relation to the fantastically generous Seed EIS (SEIS) funding tax-break for early stage companies.
Investors can, in effect, be ‘subbed’ £78,000 by the Government for a £100,000 investment into a qualifying SEIS company – which is fairly staggering when you take into account the added benefit that, should the investee company become a roaring success, the investor can sell their shares ‘tax-free’ after three years!
Given these hugely valuable tax breaks, why aren’t we seeing more Seed EIS activity?
I am coming across a few reasons:
- Lack of awareness – in fairness, this tax break has only been available since 6 April 2012
- Confusion between SEIS and EIS – I have had a few instances where companies have already received funding under EIS so cannot then follow on with SEIS
- Biggest reason – difficulty matching investors / business angels with qualifying promising investee companies.
I am unsure whether this experience is mirrored across the country but this is certainly something that I am seeing in the north west. Meanwhile, more savvy entrepreneurs are utilising this tax break to help subsidise offshoot ventures.
We need to provide more support for early stage companies (Note: early stage / seed for SEIS means a company that has been trading for less than two years) and – although I am aware there are regulatory issues – I would be interested in exchanging ideas for how we can improve the process of matching Business Angels with potential SEIS qualifying companies across the north west and UK more widely.
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