How UK Enterprise Schemes can benefit a female founder

If you’re a female founder raising finance in the UK, you have a UK-registered company (or have a branch or subsidiary in the UK), and you’re a UK resident, you may qualify for the Seed Enterprise Investment Scheme (SEIS) and/or the Enterprise Investment Scheme (EIS). Early-stage investors are much more interested in those companies that qualify for SEIS/EIS because they can get attractive tax breaks whilst supporting high-growth UK companies. 80% (i) of the total UK angel investors' portfolio is in SEIS/EIS eligible businesses, demonstrating just how important this is to them. 

In September 22 the UK government extended the SEIS scheme. In challenging times, investors tend to put their money into their existing portfolio or in less risky later stage businesses, where there are far fewer women-led start-ups in play. So, by encouraging money to flow into the pre-seed venture stage businesses should in theory mean we fund more female founders.

Key benefits of the scheme

Some key benefits of the scheme are that investors can claim back up to 50% of their investment against income tax, offset any losses they make against capital gains or income tax, and don’t have to pay capital gains tax when they sell their shares if they’ve held them for at least 3 years, nor pay any inheritance tax if shares held for at least 2 years. (Win-win!)

Note that you must use any qualifying investment to grow the business through trading activity or investing in research and development; you can’t use EIS funding to pay back loans. Employees, major shareholders, and family members who invest in your business don’t qualify for the scheme. If you’re raising money using an ASA this can still be done within the SEIS / EIS investment scheme if your ‘priced’ investment round happens within 6-months. Here are the key differences between the two schemes:

SEIS

• Focused on very early-stage companies

• Your business must have been trading for less than 3 years

• Only the first £250k you raise can qualify

• Investors get 50% tax break

• Investors can put in a maximum of £200k total per year into SEIS start-ups

• Investors can’t take more than a 30% stake in your business to qualify

EIS

• Designed with small and medium-sized businesses in mind

• Your business must have been trading for less than 7 years, or have raised

some EIS funding within the first 7 years

• You may raise up to £5m per year of EIS funding

• Investors get 30% tax break

• Investors can put in a maximum of £1m total per year into EIS start-ups

Do check all the latest rules and qualification criteria on SEIS and EIS with HMRC.

Most investors will want to see you have Advanced Assurance that you qualify for SEIS/EIS before they invest, which you can apply for from HMRC. You’ll need to have all the information about your business (for example, your financial forecasts and pitch documents) ready to send in with your application. It’s possible to make this application yourself, although you may wish to get the support of your financial advisor if you feel your case might be complex or to be certain you’ll get it all right. 

So female founders if you think you qualify, it may be a great opportunity for you and your business. For further information or need help during the application process, please get in touch with us!