Mini budget: SEIS and EIS relief: what do the changes mean for your business?

On 17 October 2022, the Chancellor of the Exchequer, Jeremy Hunt, confirmed the reversal of almost all tax changes recently announced by former Chancellor Kwasi Kwarteng, with updates to the SEIS and EIS tax relief schemes being some of the only aspects of the budget which appear (at the time of writing this) to have been spared.

Here, we’ve outlined the proposed updated SEIS and EIS relief limits, proposed updates to Company Share Option Plans (CSOP) and considerations for those currently seeking angel investment.

Increases of SEIS limits

According to the announcement, increases of SEIS limits will proceed, and if brought into law this means:

1. Businesses will be able to fundraise up to £250,000 in SEIS, £100,000 more than the previous cap of £150,000
2. To raise SEIS, businesses will need to have less than £350,000 in gross assets; this was previously capped at £200,000
3. Previously, individuals could only invest a maximum of £100,000 – the cap will be raised to £200,000

Company Share Option Plans (CSOP)

If brought into law, businesses that qualify will be able to issue £60,000 in Company Share Option Plan (CSOP) options to its employees. Previously, companies could only issue £30,000 of CSOP options. The new rule change, if brought into law, will affect any new options that are issued from April 2023, with existing options remaining unaffected.

Angel investment

For business owners and founders currently in the process of raising angel investment, it is important to consider the changes above. These updates could impact how much you are able to raise and when you close your investment round.

Jas Bhogal, corporate partner at Harper James says:

We act for a lot of start-up companies seeking investments and have always found the offering of SEIS and EIS relief is a huge incentive to encourage investments from individuals who can benefit from this relief.

I believe the changes will, if brought into law, have a positive impact on the investment market and we will see more investment opportunities for companies who are eligible for this relief.

Currently, a lot of our clients have interest from investors seeking SEIS relief (as a higher tax relief) and as the threshold was previously set at £150k they sometimes had to reduce the committed investments to fit within the allowance available. They now have an additional allowance available for allocation which for start-ups can be a huge benefit. With the eligibility criteria for companies changing slightly, more companies will be able to benefit from this relief.

A ‘sunset clause’ was previously in place for the EIS schemes, meaning that the government could choose to discontinue them from 6 April 2025. However, from what has come of the recent changes in the mini-budget, the UK Government will continue to support the Venture Capital Trust (VCT) and SEIS/EIS schemes and it appears these will also be extended beyond 2025.

It’s important to note that although this is positive news for businesses going forward, these updates may be subject to change.