The scheme, which is aimed at companies less than two years old and with fewer than 25 employees, offers a string of tax breaks to investors prepared to back small start-up businesses.
Figures from Radius Equity show that 2,582 start-ups applied to HMRC for SEIS status in 2013-14, compared to 1,644 in the previous year.
How does SEIS work?
By investing in a small trading company under the Seed Enterprise Investment Scheme investors can gain 50% income tax relief on an investment of up to £100,000.
Capital gains on SEIS shares are exempt from tax if the shares are held for at least three years, and a tax exemption is available for 50% of any capital gains that are reinvested.
If the higher rate of CGT is saved, the overall tax relief is therefore 64% (50% plus half of 28%).
But be warned – investing in small companies can be very risky and you must hold SEIS shares for three years in order to retain your income tax credit.
If you are interested in this relief and would like to find out if it could be relevant to you or your business please do contact us.
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.