Budget 2015 – SEIS/EIS Changes

HM Government has announced a number of (mostly welcome) changes to the SEIS and EIS schemes. The changes should further encourage expansion of the schemes to the benefit of investors and founders alike.

This briefing provides a summary of the main changes.

HM Government has announced that it will make the following amendments to the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT’s). These changes are to “ensure that the UK countries continue to offer significant and well-targeted support for investment into small and growing companies, in line with new EU rules”.

1. Subject to state-aid approval, the government will require that companies must be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company’s activity.

2. HM Government will also introduce a cap on total investment received under SEIS, EIS and VCT (the tax-advantaged venture schemes) of £15 million, this cap increasing to £20 million for knowledge-intensive companies. Knowledge-intensive companies are companies which provide tailored services to corporate clients and rely heavily on the problem solving capacity of their employees.

3. HM Government will increase the employee limit for knowledge-intensive companies to 499 employees from the current limit of 249 employees.

4. The requirement that 70% of funds raised under SEIS must have been spent before EIS funding can be raised will also be removed from 6 April 2015.

5. Companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from benefiting from EIS, SEIS and VCT investment from 6 April 2015, with the exception of community energy generation undertaken by qualifying organisations which will in future become eligible for the Social Investment Tax Relief (SITR). HM Government will allow a transition period of 6 months following state aid clearance for the expansion of SITR before eligibility for SEIS, EIS and VCT is withdrawn. This will have a significant impact on the hydro-electric and anaerobic digestion sectors which are currently qualifying activities for SEIS, EIS and VCT purposes.

Further information will be given over time and will be included in the Finance Bill 2015.