Archives For SEIS

You might think that with the budget of last week, it is all gloom for non-doms. However, it would pay to revisit a previous government initiative.

On 6 April 2012, the government introduced the very attractive Business Investment Relief (“BIR”) for non-UK domiciliaries. This is relevant if you are currently a resident in the UK, are treated for tax purposes as non- domiciled (non-dom), and have overseas income and gains.

Before 6 April 2012, if you brought, for example, £100,000 into the UK to make an investment (and are a 50% tax payer) then the amount you could have invested was around £50,000 after paying £50,000 in tax.  This would obviously discourage you from bringing your money into the UK.  However, if you as a non-dom now bring £100,000 into the UK to invest, you are able to invest the full £100,000 under BIR.

This is exactly what Business Investment Relief does, as it allows offshore resources which were previously excluded from the UK to now be invested in the UK tax free.

In effect – with top rate Income Tax rates at 50% – the UK Government is effectively giving a non-dom a subsidy of 50% on their investments.

In addition, you can also use the other reliefs such as EIS or SEIS when making an investment using funds remitted to the UK. This will also potentially save you up to 50% on your income tax bill (30% for EIS and 50% for SEIS).

For example, if a UK resident (but foreign domiciled individual) wants to invest £100,000 in a UK company using foreign income or gains, it can now been done with no exposure to tax; if structured correctly.

A £100,000 investment in an SEIS company gives back £50,000 (50% of £100,000) of income tax relief.  Therefore, in this example, the combination of Business Investment Relief and Enterprise Investment Relief would give the investor a UK taxation saving of £100,000 (being £50,000 BIR plus £50,000 SEIS relief).

Another relief is the ability for inheritance tax to be avoided.  If the investment is into an EIS or SEIS for example, it will qualify for business property relief after two years and therefore be inheritance free.

On the first glance, It does not seem likely that the UK government would be that generous with its revenue. Nevertheless, these tax reliefs are available to investors in certain instances.

To be eligible for the relief, the company seeking the investment must have:

  1. A permanent establishment in the UK for a period of 3 years from the issue of the shares.
  2. All the money raised by the share issue must be used within two years in a ‘qualifying trade.’
  3. The trade must be carried on by the parent company or subsidiary which is a 90% subsidiary for a period of 3 years from the issue of the shares.

I guess the reasoning here is that if the company establishes a permanent establishment in the UK this must lead to some of the investment being made in this country which can only help better the economic prosperity of the country.

Spundge, a Canadian company, is currently raising EIS funds on www.crowdforangels.com. They have established a UK subsidiary and a London office as part of this process. Andrew Edwards of Spundge stated, “Raising investments for the UK subsidiary that is going to be responsible for driving forward its international development, through its London Office was made considerably easier with the availability of EIS tax relief for UK investors, to be able to invest via the Canadian Holding Company. That way investors can invest in the entire Spundge operation, including its intellectual property as well as all its  international business.”

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  • Crowd for Angels is the first platform to provide funding for companies through their growth cycle, from seed to listed
  • First directly regulated debt and equity platform
  • Launch pitches include AIM listed Advanced Oncotherapy Plc
  • Enables listed companies to generate funding outside of traditional circles
  • Gives investors access to products normally reserved for institutional clients.

Crowd for Angels, the first crowdfunding platform to provide funding for companies from seed all the way through to listed has launched today. The platform, which is also the first directly regulated debt and equity platform, already has three live pitches.

It is launched by Tony De Nazareth who has over 30 years’ experience of investment banking, venture capital and lending. He has combined his experience and knowledge of finance with his interest in social media and technology to create an innovative source of funding that competes with, and has the potential to replace the traditional sources of funding for companies.

The launch pitches include film company Mughals, The Series Ltd, which is looking to raise funds for a new high end prime time TV drama, the Mughals – supported by actress Mamta Kaash; Bet Fast Ltd, a mobile software company which provides software to bookmakers & stadiums; and AIM listed company Advanced Oncotherapy, a provider of radiotherapy systems, which has a £22.7m market cap and recently raised £6m through traditional channels.

Director and founder, Tony De Nazareth comments: “This is the first time that a directly regulated crowdfunding platform combines debt and equity pitches in one place. I want to bring innovative and appealing products to the crowd, fund companies through all phases of their growth cycle and also enable companies to find funding outside of traditional circles. Crowd for Angels presents a unique and appealing platform to the crowdfunding sector offering niche products that other platforms do not offer. We are challenging the status quo by developing new ways of doing things such as having a minimum and a maximum fund raising target for pitches which does away with the standard ‘all or nothing’ approach. The fact that we have a listed company as one of our opening pitches speaks volumes about the need for a new crowdfunding model such as ours. The beauty of our platform is that a company can begin with raising seed capital and carry on being funded through to Pre-IPO and when listed. Companies can use our platform to get fast and flexible financing on their terms and investors have an opportunity to invest in attractive products that would not normally be available to them.”

The benefits of Crowd for Angels include:

For Investors

  • No fees
  • Up to 50% tax relief on investments through SEIS and EIS
  • Short term convertible loans, thereby reducing the probability of default with the option of converting before maturity.
  • Invest from as little as £25
  • Investors can potentially make returns of over 10 per cent
  • Crowd for Angels platform is regulated under the April’s FCA guidance on the sector

For companies

  • A Minimum and Maximum target – funds are released on the minimum target being reached
  • It provides funding for the entire growth cycle – from seed to listed
  • Two funding targets, that allows companies to gain access to funding more quickly
  • Nominee structure so companies only deals with one investor
  • Reduces the chance of a drop in share price on conversion, as multiple investors with different risk profiles and time horizons are unlikely to convert and sell at the same time.