On 15 March 2023, the Chancellor of the Exchequer, Jeremy Hunt, confirmed the proposed updates made to SEIS and EIS tax relief schemes in the 2023 budget, after sparing these schemes in the mini-budget announcement made on 17 October 2022.
Here, our Corporate Partner and funding expert, Jas Bhogal, has outlined the confirmed updates and what this means for businesses going forward.
Increases of SEIS limits
According to Budget 2023, increases of SEIS limits will proceed and be brought into law, meaning:
- Businesses will be able to fundraise up to £250,000 in SEIS, this is £100,000 more than the previous cap of £150,000
- To raise SEIS, businesses will need to have less than £350,000 in gross assets; this was previously capped at £200,000
- Previously, individuals were limited to invest a maximum of £100,000 – the cap will now be raised to £200,000
For business owners and founders who are considering or currently in the process of seeking and raising angel investment, it is important to consider the changes that have been announced above – these updates could have an impact on how much you are able to raise.
We act for a lot of start-up companies seeking investments and have always found the offering of EIS and SEIS relief a huge incentive to encourage investments from individuals who can benefit from this relief.
The changes that have been confirmed 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 EIS schemes, meaning that the government could choose to discontinue them from 6 April 2025. However, from what has come to light in the 2023 budget, the UK government will continue to support the Venture Capital Trust (VCT) and SEIS/EIS schemes, with it appearing that these will also be extended beyond 2025.