If you are investing in a company to utilise EIS/SEIS tax relief there are several issues and rules on the shares.

• It is at your discretion which investors receive SEIS and which receive EIS – typically you would raise under SEIS first.
• You can raise under both SEIS and EIS, however you must not issue shares under both schemes on the same day.
• Make sure you issue the shares after you receive your investment (i.e. the money is in the bank first, then issue the shares).
• The shares must be newly issued, not existing shares.
• The shares must be full risk ordinary shares which are not redeemable and carry no special rights to a company’s assets if it closes down.

• Shares you issue can have limited preferential rights to dividends. However, the rights to receive dividends cannot be allowed to accumulate or allow the dividend to be varied.
• You cannot use a loan to buy the shares if it was only approved (or the terms were only approved) for the purchase of the shares.

There cannot be an arrangement when the shares are issued:

• to protect your investment.
• to sell the shares at the end of, or during, the relevant period.
• to structure the company’s activities to let you benefit in a way that’s not intended by the scheme.
• for a reciprocal agreement where the company’s owner invests back in your company to also gain tax relief.

For EIS, you will not be able to claim Income Tax relief if you received the new shares and you already hold other shares in the company that were not either shares:

• issued to you when the company was formed
• for which you’ve received a compliance certificate (form EIS3)

You need to keep your whole investment in a company that qualifies for EIS and SEIS for at least 3 years to claim the full tax reliefs available. You will lose tax relief if during this time:

• you sell some or all of the shares.
• the company fails to meet the conditions for the scheme.
• you develop a connection with the company.
• you receive money or other assets from the company or unusually high interest on a loan from them.

You’ll also lose tax relief if the company pays back money invested in shares to investors who have not received tax relief. For EIS this applies for 12 months before the share issue. For SEIS this applies from the date the company or enterprise was started.

You need to tell HMRC within 60 days of any of these occurring.

If you need information on this or help clarifying these conditions, please contact us on

[email protected]

07813-915-038