There are two key, and very generous, tax breaks to look for when it comes to investing on Crowdcube. Both of which can be carried back to the previous tax year.
The Enterprise Investment Scheme is designed to help smaller, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify. For the investor, it’s a tax efficient way to invest in small companies.
People can invest up to £1,000,000 in any tax year and receive 30% tax relief. However, they are locked into the scheme for a minimum of three years.
What makes it even more attractive is the 'carry back' facility where investments can be applied to the preceding tax year.
More than 20 years later, those “considerable difficulties” in raising small amounts of capital are still a pertinent feature of the business landscape.
SEIS is an incredibly generous derivative of the Enterprise Investment Scheme (EIS) and was introduced in April 2012. Its aim is to encourage seed investment in early stage companies.
Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares.
The maximum amount to be raised for each company is £150,000.
Of course we all hope our investments do well, but if you pay tax at 45% and make an investment of £10,000 that fails completely, you only lose £2,750 due to the tax relief. That’s what makes the Seed Enterprise Investment Scheme (SEIS) so attractive to investors and entrepreneurs alike.
The availability of any tax relief, including EIS and SEIS, depends on the individual circumstances of each investor and of the company concerned, and may be subject to change in the future. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice before proceeding with your investment.
Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions. You will only be able to invest via Crowdcube once you are registered as sufficiently sophisticated. Please click here to read the full Risk Warning.
This page is approved as a financial promotion by Crowdcube Capital Limited, which is authorised and regulated by the Financial Conduct Authority. Pitches for investment are not offers to the public and investments can only be made by members of crowdcube.com on the basis of information provided in the pitches by the companies concerned.