The Government announced in the Budget 2011 that it would bring forward proposals to support investment in smaller, early stage companies. A consultation document, “Tax-advantaged venture capital schemes: a consultation”, was published on the Treasury website on 6 July 2011 setting out in detail a number of design issues for a new scheme to support very early stage companies. The Government's consultation response document was published on 6 December 2011.

The new scheme – the Seed Enterprise Investment Scheme (SEIS) – will be focused on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade. The scheme will make available tax relief to investors who subscribe for shares and have a stake of less than 30 per cent in the company.

The relief will apply to investments made on or after 6 April 2012.

The relief will:

  • apply to smaller companies, that is those with 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business;
  • give income tax relief worth 50 per cent of the amount invested by individual investors with a stake of less than 30 per cent in such companies, including directors who invest in their companies regardless of the investor's marginal rate of income tax;
  • apply to subscriptions for shares, using the same definition of eligible shares as EIS;
  • apply to an annual amount of investment of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under EIS;
  • provide for relief within an overall tax favoured investment limit of £150,000 for the company. To give the greatest degree of flexibility, this will be a cumulative limit, not an annual limit;
  • provide for an exemption from CGT on gains on shares within the scope of the SEIS;
  • and, provide for an exemption from CGT on gains realised from disposals of assets in 2012-13, where the gains are reinvested through the new SEIS in the same year.

The measure will support the Government's growth agenda by helping smaller, riskier, early stage UK companies, which may face barriers in raising external finance, to attract investment, making it easier for these companies to be established and to grow.

The consultation document also sought views on simplifying the existing Enterprise Investment (EIS) scheme. The Government have yet to publish their response document.