FUNDRAISING IN THE UK
SCENE ONE
INT. DAY. MEETING ROOM.
A UK TAXPAYER LOOKS TO INVEST IN A BUSINESS
INVESTOR: I'm interested in your start-up. It's obviously splendid, but I'm still weary of losing all my money. What can you do to protect my downside? I'm considering putting £10,000 in.
YOU: Hmm, how about money off your tax bill for performing such a noble act? Would 50% of your investment do, so £5,000 off your income tax bill. This year's or last year's - your choice.
INVESTOR: Blimey, effectively half price? Not bad at all. But still, what if the shares become worthless?
YOU: Loss relief should comfort your misery somewhat. Of the remaining "at risk" capital of £5,000, how about 45% of that back if you're a higher rate tax payer? That means you'll have only lost £2,750.
INVESTOR: Gosh yes, that'd take the edge off a bit. Now, let's focus on the upside, seeing as you're actually going to be marvellously successful?
YOU: Absolutely. How's no Capital Gains Tax if you hold the shares for three years sound?
INVESTOR: Spiffing! Though speaking of Capital Gains, I sold something recently & have a bill to pay - so irksome.
YOU: Well, if you use that gain to invest in these shares, you can put that bill off for a while.
INVESTOR: Oh that'd certainly help manage things. Hmm, I'm thinking of investing more now!
YOU: Well, you can invest up to £100,000 a year in any number of qualifying companies, but you can of course just give it all to me.
INVESTOR: This all sounds wonderful. But what about the absolute worst case scenario?
YOU: No inheritance tax - on these shares at least!
INVESTOR: Crikey. What's the downside on all of this? Do you have to give shares to the government or something?
YOU: No, just some forms to fill & some criteria to meet.
INVESTOR: Ah yes, the rules, I suppose there are some. Where can I check all the details?
YOU: Well, there's HMRC information here, & here, but you can just google "Seed Enterprise Investment Scheme" or "SEIS" to find plenty of websites putting in plain English, such as this one*.
END SCENE
SCENE TWO
INT. DAY. STUDIO
PRESENTER: You could use SEIS to raise up to £150,000 for your business. Even foreign companies that have a UK base could be eligible. If your business is less than two years old, has fewer than 25 full time equivalent employees, no more than £200,000 in gross assets, & is carrying on a qualifying trade (& there's not too many that aren't), you could benefit.
After that, you can move onto the Enterprise Investment Scheme (EIS) to raise up to £5 million. This is similar to SEIS, but offers 30% off the investors income tax bill, instead of 50%. More details available here, here, here* & of course, your old friend Google.
FIN.
*Not an endorsement of Seedrs. I've not used them. I just found their explainers decent, so have linked them.
I have however worked for tech start-ups that have used SEIS & EIS to help raise funds. Searched on this forum & realised no threads came up! Thought I'd make this little introduction.
SCENE ONE
INT. DAY. MEETING ROOM.
A UK TAXPAYER LOOKS TO INVEST IN A BUSINESS
INVESTOR: I'm interested in your start-up. It's obviously splendid, but I'm still weary of losing all my money. What can you do to protect my downside? I'm considering putting £10,000 in.
YOU: Hmm, how about money off your tax bill for performing such a noble act? Would 50% of your investment do, so £5,000 off your income tax bill. This year's or last year's - your choice.
INVESTOR: Blimey, effectively half price? Not bad at all. But still, what if the shares become worthless?
YOU: Loss relief should comfort your misery somewhat. Of the remaining "at risk" capital of £5,000, how about 45% of that back if you're a higher rate tax payer? That means you'll have only lost £2,750.
INVESTOR: Gosh yes, that'd take the edge off a bit. Now, let's focus on the upside, seeing as you're actually going to be marvellously successful?
YOU: Absolutely. How's no Capital Gains Tax if you hold the shares for three years sound?
INVESTOR: Spiffing! Though speaking of Capital Gains, I sold something recently & have a bill to pay - so irksome.
YOU: Well, if you use that gain to invest in these shares, you can put that bill off for a while.
INVESTOR: Oh that'd certainly help manage things. Hmm, I'm thinking of investing more now!
YOU: Well, you can invest up to £100,000 a year in any number of qualifying companies, but you can of course just give it all to me.
INVESTOR: This all sounds wonderful. But what about the absolute worst case scenario?
YOU: No inheritance tax - on these shares at least!
INVESTOR: Crikey. What's the downside on all of this? Do you have to give shares to the government or something?
YOU: No, just some forms to fill & some criteria to meet.
INVESTOR: Ah yes, the rules, I suppose there are some. Where can I check all the details?
YOU: Well, there's HMRC information here, & here, but you can just google "Seed Enterprise Investment Scheme" or "SEIS" to find plenty of websites putting in plain English, such as this one*.
END SCENE
SCENE TWO
INT. DAY. STUDIO
PRESENTER: You could use SEIS to raise up to £150,000 for your business. Even foreign companies that have a UK base could be eligible. If your business is less than two years old, has fewer than 25 full time equivalent employees, no more than £200,000 in gross assets, & is carrying on a qualifying trade (& there's not too many that aren't), you could benefit.
After that, you can move onto the Enterprise Investment Scheme (EIS) to raise up to £5 million. This is similar to SEIS, but offers 30% off the investors income tax bill, instead of 50%. More details available here, here, here* & of course, your old friend Google.
FIN.
*Not an endorsement of Seedrs. I've not used them. I just found their explainers decent, so have linked them.
I have however worked for tech start-ups that have used SEIS & EIS to help raise funds. Searched on this forum & realised no threads came up! Thought I'd make this little introduction.
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