Expats Can Cash In On SEIS And EIS tax breaks

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Written By Saeed Maleki

Investing in UK start-ups and collecting attractive tax breaks is possible for British expats.

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are open to any investor regardless of where they live in the world.

Both offer market-leading tax breaks, but only for expats who are tax resident in the UK.

The rule of thumb is expats can invest but cannot claim tax relief if they do not pay income and capital gains taxes in the UK to set against the incentives.

So, international workers who maintain a UK home as a base are likely to qualify for SEIS and EIS, but expats who have permanently relocated cannot.

Tax benefits of SEIS and EIS

The good news is big earners who have exhausted their £40,000 a year annual allowance for tax-relieved pension contributions can shift their focus to start-ups.

Yes, they are risky investments as they have little or no trading history, but the tax relief is generous and the returns on the gamble can be excellent.

SEIS offers a 50% reduction in income tax for investing up to a maximum £100,000 in a tax year.

The scheme also comes with IHT relief, no CGT on share disposals and loss relief if the start-up goes belly up.

EIS comes with similar benefits, but the numbers are different.

The annual investment cap is £1 million and comes with a 30% income tax deduction.

seis guide download

How to invest

For both, shares must be held for at least three years to gain maximum tax benefits.

Investments can be made direct, through a crowdfunding platform or by putting money into a specialist managed fund.

EIS was launched in 1994 and has attracted £16 billion of investment with 26,000 companies, while SEIS started in 2012 and is aimed at smaller new businesses with difficulties raising funds from traditional sources, such as banks. SEIS has raised almost £200 million for several thousand new businesses.

Investment terms are strict for companies looking for cash and expats with money to buy their shares.

HM Revenue & Customs supervises SEIS and EIS.

A lot of valuable information to help potential investors and entrepreneurs with the rules is published on the HMRC web site

If you are an entrepreneur or an investor, you can find more information and download an SEIS Guide at SEIS.co.uk