In September 2022, the UK government announced the Growth Plan 2022, introducing further tax benefits and changes to the Seed Enterprise Investment Scheme (SEIS) to boost start-ups and young companies. SEIS is a government initiative that offers tax relief to individual investors who buy and hold new shares, bonds, or assets in start-ups for a specific period.
Previously, companies could raise up to £150,000 through SEIS if they met certain requirements, such as trading for less than two years, having gross assets of less than £200,000, and having fewer than 25 full-time equivalent employees. Individual investors could invest up to £100,000 in start-ups using SEIS in any tax year.
The new rule proposed in the Mini Budget allows start-ups to raise up to £250,000 through SEIS, a two-third increase from the previous limit. The trading period has been increased to three years, and the gross asset requirement has been raised to £350,000. Companies that have already raised up to £150,000 through SEIS but have not raised further funds under EIS or a venture capital trust can raise an additional £100,000 under the new rules. Individual investors can now invest up to £200,000 in start-ups using SEIS in any tax year.
While the new rules were proposed to apply from 6 April 2023, they have not yet been passed into law. The amendments to SEIS are set out in the Finance (No. 2) Bill and are currently going through Parliament for approval. HMRC has confirmed the amendments will take effect from 6 April 2023, but it is unlikely they will approve shares issued over the £150,000 limit before the bill becomes law.
The new amendments are welcome news for start-ups seeking funding during times of high interest rates, as well as for investors who can benefit from the expanded SEIS rules.
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