Increasing the limits of the Seed Enterprise Investment Scheme
Published 15 March 2023
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Who is likely to be affected
Companies and individuals using the Seed Enterprise Investment Scheme (SEIS), fund managers and other promoters and advisers associated with the SEIS.
General description of the measure
This measure increases the existing limits that apply to company access and use of the SEIS and the investment amounts on which individuals can claim tax reliefs.
Policy objective
This measure is intended to provide a boost to start-ups and young companies by widening access to the SEIS and increasing the funding limits, encouraging additional investment and so further supporting the growth of these early-stage companies.
Background to the measure
This measure was announced on 23 September 2022.
Detailed proposal
Operative date
The measure will have effect from 6 April 2023.
Current law
Part 5A Income Tax Act 2007 and Schedule 5BB Taxation of Chargeable Gains Act 1992 contain the contain the rules for investors and companies using the SEIS.
Proposed revisions
Legislation will be introduced in Spring Finance Bill 2023 to amend the limits on the size and age of the companies that can access the SEIS as well as on the amounts that they can raise and on which investors can claim income tax and capital gains tax reliefs. The following are to be increased:
- The ceiling that applies to the investment a company can raise in the relevant period and on which investors can claim relief - from £150,000 to £250,000.
- The limit that applies at the date of investment on the “gross assets” a company can have - from £200,000 to £350,000.
- The age limit that applies to the definition of a company’s “new qualifying trade” at the date of investment - from 2 years to 3 years
- The annual limits that apply to the investment amount on which individuals can claim income tax and CGT re-investment reliefs - from £100,000 to £200,000
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | Nil | -25 | -20 | -20 | -20 |
These figures were set out in Table 5.1 of Autumn Statement 2022 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2022.
Updated estimates consistent with Spring Budget 2023 forecasts can be found in Table 4.2 of Spring Budget 2023.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Behavioural impacts will include increased seeking of investment by seed-stage companies and increased investment from individual investors as a result of increasing the investment limits.
Impact on individuals, households and families
This measure is expected to impact around 9,000 individuals who invest in companies using the SEIS. The changes will increase the amounts they will be able to invest and on which tax reliefs can be claimed as well as expanding the pool of companies they can invest in. It is not expected to impact on family formation stability or breakdown. Customer experience is expected to remain broadly the same as this measure does not change how individuals interact with HMRC.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not expected that there will be adverse effects on any group sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a positive impact on around 2,000 businesses who raise capital via the SEIS annually. The measure will impact businesses, fund managers and other promoters and advisers using or associated with the SEIS by increasing the limits and so widening access to and usage of the scheme. This measure is expected to have a negligible impact on business administrative costs of familiarisation with the changes. There are not expected to be any continuing costs. Customer experience is expected to remain broadly the same as this measure does not change how businesses interact with HMRC. There are not expected to be any impacts on civil society organisations.
Operational impact (£m) (HMRC or other)
HMRC will need to make some changes to IT systems to implement these changes and there will be some additional staff costs to administer the new rules. These costs are expected to be in the region of £800,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from the statutory Compliance Statements submitted by companies using the SEIS.
Further advice
If you have any questions about this change, please contact the Venture Capital Schemes policy team by email: venturecapitalschemes.policy@hmrc.gov.uk.