A Capital Gains Time-Bomb

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) offer attractive opportunities for investors in early and seed-stage companies. SEIS allows businesses to raise up to ￡250,000, providing investors with 50% income tax relief.

EIS, the SEIS older sibling, targets early-stage companies and allows them to raise up to ￡5 million within a 12-month period, giving investors 30% income tax relief.

In simple terms, investing in (S)EIS-eligible shares allows you to claim a percentage of the investment value as income tax relief. For example, if you invest ￡1,000 in a pitch on Crowdcube that is (S)/EIS eligible, you can claim ￡500/￡300 back in income tax relief.

Additionally, if the investment becomes worthless, SEIS provides 70% downside protection, while EIS offers 50% (loss relief is dependent on your tax status so may vary slightly).

If the company grows in value and exits, investors who claimed their original EIS relief are also eligible for 0% capital gains tax.

A commonly unknown fact is, however, that if the business raised funds under the EIS scheme and you didn't claim your original relief, then you will have to pay capital gains tax on any return your investment may make.

In total, (S)EIS schemes have raised over ￡24 billion of capital for 30,000+ companies since their introduction in 1994. In the 21'-22' tax year alone, (S)EIS investment peaked at ￡2.5 billion for 4,000+ companies.

Crowdcube alone processed over ￡700 million of (S)EIS-eligible shares from 650,000+ individual investments.

Our research shows that a significant number of Crowdcube members are not aware of or have not claimed EIS relief.

68% of users with a portfolio size of ￡5,000 or less have not yet claimed, and 56% were not even aware they could.

This really felt like too big a problem not to address so we decided to approach Tax Scouts, one of our portfolio companies, with the aim of launching a fully digital (S)EIS processing solution for investors big and small.

What's useful is that (S)EIS schemes allow you to apply for tax relief for up to 5 years retrospectively, and I am excited to announce today that this service is now available to all Crowdcube members.

For more information on the service, please check it out via the link below. We have been live for 24 hours now and are already receiving some great feedback.

"Simple and practical and so much easier than trying to do it yourself and whilst all being online"

Andrew, Crowdcube Member since 2016 ￡288 tax relief claimed from ￡960.53 invested

"The idea of completing a tax form fills me with dread, and it's fantastic to have such an easy, online solution to claim EIS relief directly into my pay cheque."

Miles, Crowdcube member since 2022 ￡790 tax relief claimed from ￡2,634 invested

Please do DM me or comment with any further thoughts or suggestions on how we can provide additional value to our members.

Thank you, and until next time.

JK

The availability of any tax relief, including EIS and SEIS, depends on the individual circumstances of each investor and of the company concerned and may be subject to change in the future. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice.