Support for new and early stage companies

In order to boost growth and employment, the Government’s autumn statement included the announcement that it would launch a new initiative called the Seed Enterprise Investment Scheme (SEIS). This new initiative will run alongside the existing Enterprise Investment Scheme but will be focused on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade (which includes most tourism-related businesses such as accommodation and attractions).

The scheme will start from 6th April 2012 and will apply to companies with fewer than 25 employees and assets of up to £200,000. In essence, the scheme will provide tax relief to investors who subscribe for shares and have a stake of less than 30% in the company (the relief is available to directors of the company as well as outside investors). The idea is to make it more attractive for “business angels” to invest in small start-up businesses, thereby increasing investment in businesses that are currently finding it difficult to gain traditional start-up loans from banks.

• give income tax relief worth 50% of the amount invested to individual investors with a stake of less than 30% in such companies;
• apply to an annual amount of investment of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under SEIS;
• provide for relief within an overall tax-favoured investment limit of £150,000 for the company. To give the greatest degree of flexibility, this will be a cumulative limit, not an annual limit;
• provide for an exemption from CGT on gains on shares within the scope of the SEIS;
• provide for an exemption from CGT on gains realised from disposals of assets in 2012-13, where the gains are reinvested through the new SEIS in the same year.

The scheme is valid for any person, meaning that the accommodation providers themselves – or their family members or acquaintances – could invest in the business, as long as each party only owns a maximum of 30% of the company’s shares.

It is interesting to note that a business doesn’t need to be publicly traded to have shares. Even private businesses have shares, although much fewer than public companies. This means that a couple could each own 30% of shares in a given business venture and one or more of their family members could own the rest of the shares for all of them to benefit from the scheme.

If you are thinking about establishing a new business, you should contact your accountant and seek their advice as to how best to structure your new business so as to benefit from this initiative.Further information on the new scheme is available from the Treasury on the Seed Enterprise Investment Scheme webpage.