SEIS and Exit Strategies

seis investment

SEIS is a government initiative that offers investors tax breaks on losses of shares in certain small companies. The purpose is to encourage more capital into start-up businesses.

The UK government seeks to encourage investment into start-ups by taking away the fear of losses. However, there are certain criteria an investor must meet in order to qualify for this investment program.

Tax reliefs

The SEIS (Seed Enterprise Investment Scheme) offers tax benefits and incentives to investors investing in eligible small businesses. These can include income tax relief and capital gains tax relief on profits made from shares held in the business you’ve invested in.

Investing in a startup company can be an excellent way to make money. But before you commit, it’s essential that you comprehend the tax benefits available and how to claim them.

To maximize the return on your investment, be sure to invest in a SEIS or EIS company that qualifies. Doing this will prevent any unnecessary charges on your investment and allow you to maximize any tax breaks available to you.

Additionally, investors in shares in a SEIS-eligible company can take advantage of loss relief and reinvestment relief provided by HMRC. Loss relief allows you to offset losses against either your Income Tax or Capital Gains Tax “CGT” amount.

When investing in shares through a SEIS-eligible business, you can save up to 50% on your Income Tax liability. For example, if you invest in the shares for PS50,000 then that would reduce your tax bill up to a maximum savings of PS100,000.

Under this scheme, you can claim reinvestment relief when selling your SEIS shares, provided that the gain is reinvested in new shares within six months. Furthermore, Capital Gains Tax relief of 50% on the gain on reinvestment may be claimed.

For investors looking to grow their investments, this can be a boon, as it reduces the amount of tax they must pay on gains. Furthermore, if you pass away after investing in a SEIS-eligible project, your beneficiaries will receive 100% inheritance tax relief.

Startups are particularly attractive to investors due to the abundance of tax benefits they offer. For instance, if you invest PS100,000 into a startup company, you can claim income tax relief for 50% of this amount and also benefit from CGT exemption on any profits generated from your investment.

Exit strategy

Exit strategies provide investors with a way to unload their investment in a company, usually by selling shares or bonds. This can be accomplished in various ways depending on an investor’s individual circumstances.

Business exit strategies can range from a straightforward sale to merging with another company. It’s essential that the strategy you select works for your unique circumstances.

Having an exit strategy is essential for business owners. It provides them with a buffer in case something unplanned happens in the future, helping them avoid bankruptcy and foreclosure.

Business owners typically create exit strategies for retirement, but there may be other reasons that you don’t know about. For instance, a business owner might need to step down if they experience an illness or family crisis that requires them to step away from day-to-day management of the operation.

An exit strategy offers you a way out if your business struggles, especially if it hasn’t yet achieved profitability. You can sell off non-essential assets to a new buyer and use that money for financing the operation until it can get back on track.

Entrepreneurs sometimes discover their business venture is not as lucrative as expected. While it can be challenging to decide whether to keep or sell, making an exit strategy part of one’s business plan can help ease this transition.

Although it can be tempting to create an exit strategy when starting your business, this is often not a wise idea. Doing so could cause significant stress and anxiety for the owner and put a damper on growth within the organization.

Other elements to take into account, such as market conditions and your company’s financial health, can influence when and how to execute an exit strategy. They could even impact the valuation of your business.


The Seed Enterprise Investment Scheme (SEIS) offers UK investors tax breaks for investing in small companies and startups. While it can be a beneficial way to diversify your portfolio and increase assets, there are some risks you should be aware of before making an investment.

One major risk is missing out on tax relief opportunities. There are a plethora of regulations to make sure your SEIS investments qualify and you can claim these reliefs.

For instance, your share investment must be supported by a substantial interest in the company – this means having at least 30% ownership stake. This standard does not only apply to shareholders; you should also take into account any associates such as business partners or trustees with ownership stakes in the business.

Another potential risk is that investing in a small business may not be as profitable as expected, leading to the potential loss of substantial amounts of capital. This scenario could leave investors disappointed and without compensation for their efforts.

Though complex, SEIS can be an invaluable asset for growing businesses, particularly those seeking to expand into new markets or enhance production processes. Furthermore, tax reliefs from SEIS can be utilized by a business to pay off debts and purchase necessary equipment.

If you’re thinking about investing in a startup, it’s wise to search out companies that have been approved by HMRC. Doing this can help avoid any unwanted tax repercussions such as losing tax reliefs or having your investment taken back.

Another potential risk is that the company you invest in may not meet SEIS eligibility requirements. As it can be challenging for new companies to determine if they qualify, it’s wise to seek professional advice before making your investment.

It’s worth remembering that SEIS is a popular way to fund start-ups, but it requires hard work and can be expensive. Therefore, having an experienced SEIS fund manager on board is recommended in order to guide your investment decisions and stay updated about any developments.

Advance subscription agreement

Advance subscription agreements enable companies to quickly raise funds in anticipation of a subsequent round. This method is often preferred by startups since it defers valuation and takes away an extensive layer of negotiation.

An advance subscription agreement (ASA) can make it simpler for companies to qualify for SEIS/EIS tax reliefs, provided it’s structured correctly and the investment meets HMRC criteria. However, this process can be complex; thus, legal advice should always be sought prior to beginning any project where an ASA is proposed.

Investors investing through an advance subscription agreement typically receive shares in the company at a discount to their value when issued during a subsequent funding round or sale or listing. This discount may range between 10% and 30% due to not having been paid for their share upfront.

Discounts should be set lower than the valuation cap set for a funding round, to prevent shares from becoming overvalued and investors still being able to claim discounts. Furthermore, an ASA often includes a longstop date where shares will automatically be allocated to an investor if the funding round does not proceed. This prevents investors receiving shares in a company before its expected growth stage has been reached, plus it allows them to claim SEIS/EIS tax reliefs.

It is essential that shares are priced accurately and valued correctly at the time of issue, as this could determine if an ASA qualifies for SEIS/EIS tax relief. This is especially pertinent when an ASA works together with either the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS), allowing investors to claim tax breaks.

HMRC recently confirmed that ASA investments are eligible for SEIS/EIS tax relief provided they are properly structured and do not breach EIS/EIS criteria, making this investment option increasingly appealing to companies and investors alike. If you require advice on any aspect of an ASA or tax-efficient investments more generally, please don’t hesitate to get in touch.