EIS Investment 2SEIS stands for Seed Enterprise Investment Scheme and EIS stands for Enterprise Investment Schemes. Such early stage investment schemes allow direct investment into new and small businesses and the tax benefits they provide serve to partially mitigate the level of risk investors inherently assume when supporting such new and small businesses.

If you are earning high amounts of income each year, and are therefore creating large amounts of income tax through this, SEIS and EIS investments can be used to allow you to claim back some or all of your income tax liability each year.

A series of well established attractive tax reliefs are designed to encourage investment into new ventures which stand to create both growth and jobs to benefit the UK economy. We are proud to have provided clients direct access to opportunities through our direct SEIS and EIS stable.  

In sourcing new opportunities, our investment committee seeks to complement the more regular fund based approach to SEIS and EIS investment with suitable direct SEIS and EIS investment opportunities with the potential for equity ownership offering uncapped growth. Once an underlying business plan is approved, we create a formal SEIS or EIS investment opportunity and invite investment toward a set monetary goal.

income tax relief

Income tax relief is available for investors to a maximum of 30 per cent of any investment into the Lakes Distillery, to be set against each individual’s income tax liability for the tax year in which the investment was made.

There is also a carry back facility which allows investors to claim tax relief against income tax paid in the previous tax year. Any shares purchased must be held for a period of three years or income tax relief will be withdrawn for not wholly complying with the required criteria for EIS eligibility.

Relief is subject to the overriding limit for relief for each year and only income tax which has been paid can be claimed back. This is claimed back via self-assessment. In the event the project ultimately creates a loss then, net of any initial tax relief, this can be offset against income tax in the tax year of crystallisation or the preceding tax year.

capital gains tax deferral

Any gain from EIS eligible investments is free from capital gains tax assuming investors have initially received income tax relief on the cost of the shares when purchased, and go on to hold the shares for three years or more.

The payment of tax on an existing capital gain can be deferred where the gain is subsequently invested in shares of an EIS qualifying company. This is commonly known in the wider market as roll-over relief. The gain can arise from the disposal of any kind of asset and to qualify, the investment must be made within the period one year before or three years after the gain arose.

If the shares are disposed of at a loss, you can elect that the amount of the loss, less any income tax relief initially given, can be set against any capital gains until the loss is reclaimed in full. Any loss can also be set against income tax in the year in which the loss arises, or any income tax of the previous year, instead of being set off against any capital gains.

inheritance tax relief

Any investment into EIS eligible companies is deemed to fall outside of the investors estate for inheritance tax purposes after a two year period. Assuming the investors estate is above the nil rate band of £325,000 per spouse, and ignoring the value of the principle residence, once this period has elapsed it has the effect of reducing an IHT liability of 40% on any capital allocated. Any allocated capital must continually be held in EIS eligible holdings to ensure it is deemed to be outside of the estate.

common sense criteria

When vetting and analysing the various EIS and SEIS opportunities put to us, we always come back to review the suitability of the project against a number of set criteria.

Some of the projects we support are brought to us externally for our consideration and some arise internally as a result of reverse engineering the SEIS and EIS investment process and seeking to create opportunities which are specifically engineered to be particularly well suited to the criteria.

The five criteria which we adhere to (listed below) have been developed through empirical
research and, where all present, combine in an integrated and coherent way to optimally
position these new and fledgling companies to grow. The combination of these criteria
with supportive and flexible financing, top class recruitment, committed research both locally and globally and strong experience in ancillary areas such as marketing and branding creates a skewed balance of risk and reward for investors.

The five core criteria we look for when assessing investment into an SEIS or EIS project are:

• An owned physical asset on the balance sheet, preferably via property
• Secondary market value in the equipment
• A management team with strong industry experience in its field
• An executive team with strong shareholder value experience
• A permanent market allowing one off set up costs to be followed by ongoing demand

professional vetting & monitoring process

Our investors have the assurance of knowing that a professionally managed investment process is protecting their investment and facilitating a successful outcome on their behalf.

As part of the SEIS and EIS investment process, Tier One Capital will usually seek to appoint a representitive as a consultant to assist and monitor the company for the duration of the project. 

Depending on the structure of the project, our representitive may carry protective capital access rights to ensure the agreed project is carried out in full accordance with the agreed strategy and within the agreed timescales.

The representive will also be charged with ensuring the accurate reporting to investors of updates on the project in a timely fashion.

For more information or to discuss your income tax mitigation needs further please contact a Tier One Capital adviser at your convenience.

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