The UK government established the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) as venture capital programs to increase the appeal of investing in SMEs.
Investors in early- or mid-stage start-ups are eligible for tax savings under both programs. If you, as a start-up, apply to the schemes, they are an excellent method to draw investors and raise money for your company. This article will guide how to write a SEIS or EIS business plan, a crucial stage in the procedure.
The two schemes are different from one another in scale.
EIS is for SMEs with less than £15m in gross assets, fewer than 250 workers, and less than seven years after the first commercial sale. A firm can raise £5m yearly and £12m in total. 30% of the invested amount is tax-free. After three years, investors are exempt from paying Capital Gains Tax (CGT), and It is possible to deduct any losses from either Income Tax or CGT. If shares are kept for two years, they're Inheritance Tax-free.
The SEIS targets early-stage start-ups and grants a 50% Income Tax exemption on investments up to £100,000 yearly with a lifetime limit of £150,000. SEIS participants can write off 50% of their investment against CGT in the same tax year.
IS A BUSINESS PLAN REQUIRED FOR SEIS AND EIS?
During Advance Assurance, you must submit a SEIS and EIS Business Plan. If applying for SEIS or EIS funding, it must submit budget projections for the next two years detailing how the funds will be used. Extra solid documentation, including draughts, is required. It may include the company's financial records, incorporation documents, shareholder agreements, Companies House filings, and director and shareholder information. A cover letter can help the HMRC evaluate all the paperwork and ensure a faster turnaround.
SEIS BUSINESS PLANS AND EIS BUSINESS PLANS
Not only is it necessary to submit an application to the HMRC for the SEIS and EIS schemes, Nonetheless a good business strategy may be shared with more than just management: potential and current investors. It is recommended that either the SEIS Business Plan or the EIS Business Plan be used as a road map for your company.
It is recommended that a SEIS or EIS Business Plan follow a structure similar to the following:
- An Executive Summary: It is a one-page document that provides a synopsis of the company's trade, the market potential, and the outcomes that the investment will produce. It might be presented as a list of "Problems" and "Solutions" in a particular order.
- Business Model: Describe the ownership type of the firm, its goals, how it is currently formed, and if investment under the SEIS or EIS schemes will alter the model in any way in this part.
- Market: The market circumstances in which the firm is now functioning or wants to operate will be discussed in this section company's needs. It will identify market prospects and provide a quantitative assessment of those opportunities. Additionally, it will include an analysis of the company's rivals and a description of the company's advantages over those competitors. In this area, you want to discuss any price plans that you have as well as sales estimates.
- Risks to Capital: It is essential for investors and the government, both of which you are attempting to convince to support any investment through the SEIS/EIS tax relief, to be aware of the risks and any conceivable scenarios. It would help if you lay up a plan to mitigate potential hazards and safeguard your financial resources. You should present this part as a SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats.
- Finances: When it comes to finances, make sure to include any trade specifics from the past and your future estimates. The average time horizon for projections is three years. However, the SEIS/EIS method requires only two years. This section should outline the funding needs and provide an in-depth justification for the investment.
- The Ask: Even if you are actively seeking investors, you must refrain from making any eligibility claims for the SEIS or EIS until you have received approval from the HMRC. It is OK to mention that you have already begun the application procedure or are currently submitting your application to the program.
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