Enterprise Investment Schemes 

How to invest in Seed EIS

This article is part of
Guide to investing in EIS

Charles Owen, director of CoInvestor, points out: “SEIS offer greater income tax relief benefits than EIS but are considerably higher risk, generally being start-ups.

“At present SITR is less widely known as fewer fund managers are promoting it due to lower total investment ceilings. It is presumed that SITR will shortly come in line with EIS in this regard and will then unlock greater investment activity.”

Tim Smith, tax partner at RSM UK, acknowledges there has been very little take-up and suggests this could be due to a missed opportunity.

He explains: “Seed EIS is most commonly accessed where individuals invest in the businesses being set up by their family and friends, as well as via some crowdfunding. 

“Unfortunately there is, arguably, a missed opportunity due to the combination of the restriction in the investment limits as well as the complexity of the legislation, so the very generous tax reliefs that are potentially available are not utilised as much as they could be.”

He goes on: “In our experience, there has been an extremely limited take-up of the SITR so it would seem that either it is not attractive to the relevant organisations, or there is a general lack of awareness.”

Bigger picture planning

It goes without saying investors should seek financial advice when it comes to any type of EIS fund.

Ms Tierney remarks that while there are basic rules around investing in SEIS, “what is more interesting is what can go wrong, and unfortunately there are a lot of complex rules to work through”.

Jonothan McColgan, director and chartered financial planner at Combined Financial Strategies, reminds advisers and their clients that these types of schemes are unregulated, so there is no comeback if an investor finds themselves falling for a scam or investing in an EIS that underperforms.

“A financial adviser will look at how it fits into your tax position and overall portfolio,” he says. 

“The financial planner helps look at the bigger picture of all your finances. Then the adviser is liable for suitability [of] advice.”

eleanor.duncan@ft.com