Smaller companies looking for money to fund growth plans can take advantage of schemes such as the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).

Both offer extremely attractive tax incentives for growing owner managed businesses looking for alternative funding streams as well as for venture capital investors.

Although the EIS and SEIS schemes are similar, they are not interchangeable. There are certain conditions around employee numbers, directorships after share issue etc. which apply to one scheme but not the other, and vice versa.

With potential income tax savings of 50%, SEIS gives investors a bigger tax break, while EIS offers 30%. That said, an investor putting £1million into an EIS can still make tax savings of £300,000 in that tax year.

Deferring CGT

Another benefit of EIS is the option to defer capital gains tax against the EIS investment, subject to certain time limits. So, if for example, you sell your limited company for £5 million and invest £1 million of your sale proceeds into an EIS then the CGT payable on £1 million of your gain can be  deferred. This is especially useful, and a number of our recent projects have been planned around utilising the CGT deferral relief.

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