UK Law and Practice Contributed by: Dylan Doran Kennett, Michael Jacobs, Stephen Newby and Mark Ife, Herbert Smith Freehills LLP
4. Government Inducements 4.1 Subsidy Programmes Government Programmes
investors are listed below (note that, for VCT relief, certain conditions “look through” into the investments made by the VCT). Conditions of the investee company • Gross asset test: GBP350,000 for SEIS; GBP15 million immediately before issue and GBP16 million immediately after for EIS and investments made by VCTs. • Full-time employees: fewer than 25 for SEIS, EIS and investments made by VCTs. • Maximum limit: GBP250,000 on, and in the three-year limit before, the SEIS investment, taking into account other state aid (for SEIS) and GBP12 million (across all schemes – ie, EIS, SEIS and investments made by VCTs). • Annual limit: GBP5 million (broadly, across all schemes). Conditions of the investor • Holding period requirement: generally, EIS and SEIS shares need to be held for three years to ensure the most tax-efficient out - comes, whilst for VCT five years produces the best tax results. • Investor claim limits: investments of up to GBP200,000 per tax year for SEIS and VCT relief, and GBP1 million per tax year for EIS. Note that the above conditions assume that the company in which the investment is being made is not “knowledge-intense company” . For investments in such companies, certain limits and thresholds may be increased. For exam - ple, the total amount of scheme (including EIS, SEIS and VCT) financing a company can receive is increased to GBP20 million; the annual limit increases to GBP10 million; and the amount of EIS relief from which an investor can benefit increases to GBP2 million.
The UK government incentivises investment in small and medium-sized, unquoted trading companies through tax relief schemes available to individuals. The three most commonly asso - ciated with venture capital are the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT) relief. The schemes are expected to be available until 5 April 2035, and each serve a different purpose. • SEIS is designed for early start-up seed capital and can be used in advance of an EIS investment. Investors benefitting from SEIS may include directors (allowing business angels to impart business advice alongside investment). • EIS relief has a similar set of requirements as SEIS, but with higher thresholds and lim - its to capture post-seed investments. Note that directors are generally disqualified from investing via the EIS regime. • VCTs are tax-approved quoted companies that invest in shares and securities in other qualifying, unquoted, trading small and medium-sized companies. VCT relief offers similar benefits to EIS/SEIS by way of indi - rect investment, thereby affording investors increased liquidity. Conditions for EIS, SEIS and VCT Relief To achieve the different purposes of each scheme, there are prescriptive conditions. How - ever, when effectively managed, the schemes can offer investors generous tax benefits. Some, but not all, of the key conditions required to obtain the most beneficial tax outcome for
597 CHAMBERS.COM
Powered by FlippingBook