TaxCorporate TaxWill SEIS unfreeze investment?

Will SEIS unfreeze investment?

Easing the tax burden on startup investors is welcomed, but advisors question whether it goes far enough

ADVISERS HAVE welcomed the freeing up of tax rules for investment in start-ups, but have questioned whether the chancellor’s plans have gone far enough.

The Seed Enterprise Investment Scheme (SEIS) was launched by George Osborne in yesterday’s Autumn Statement. SEIS will enable individuals who invest up to £100,000 in a new business to claim 50% tax relief on their investment, regardless of their tax rate.

For 2012/2013, where a capital gain is realised and invested under this scheme in the same tax year, the gain will be exempt from tax.

Some advisors are concerned that the £100,000 limit is too small, effectively restricting an investor to one or two investments a year.

“We’d like to see the limit increased to at least £300,000 to maximise the number of start-up business that can benefit,” said Stephen Bayfield, PKF corporate finance partner.

Alongside SEIS, Osborne announced easing previous restrictions on R&D tax credits, extensions to business rate relief holidays and government underwriting of small business loans through the National Loan Guarantee Scheme. Rules restricting ‘friends and family’ gaining tax relief under the Enterprise Investment Scheme was also lifted.

As a whole, Berg Kaprow Lewis tax partner David Whiscombe welcomed the government’s direction on helping micro businesses and SMEs. “The combination might just be what is needed to kick-start private investment into new micro-businesses.

Others were unsure that the proposals went far enough.”The question with both of these is how much of an effect will they have. The SEIS measures are very generous but also relatively small, while for businesses the 1% reduction in borrowing costs offered by credit easing may not solve every problem – the availability of borrowing at all and the lack of demand in the economy are likely to weigh more heavily,” said PwC partner Alex Henderson.

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