Buckworth Solicitors taking advantage of seis

www.buckworthsolicitors.co.uk

Taking Advantage of SEIS

Presented by

Michael Buckworth


What are we covering?

•  Who am I? •  What is SEIS? •  What are the requirements for the Company? •  What are the requirements for the Investors? •  What structures work? •  What is the procedure? •  Q&A session


Who am I?

Career •  Studied law at Merton College, Oxford University

•  Trained and qualified at Shearman & Sterling LLP and subsequently pracKced at Cleary GoMlieb Steen & Hamilton LLP

•  Set up Buckworth Solicitors in 2011 Ra'onale of the firm •  To provide access to legal advice of the same quality as that given

by a top City of London law firm but at much more affordable rates

•  Fixed fees

•  Service culture


What is SEIS?

•  (Seed) Enterprise Investment Scheme

•  Tax rebate scheme

•  High risk investments •  Startup companies •  Full risk investments •  No preferenKal treatment

•  IncenKvise high net worth individuals


Why is SEIS relevant to startups?

•  Give an income tax refund to investors equal to 50% •  Reduces risk of investment to investor – i.e investor risks

£50,000 of cash and not £100,000

•  Can make investment cheaper for the company


Example of Relief Calculation

SEIS •  Income Tax Relief

•  Investor invests £100k under SEIS in tax year 12/13 •  Investor has income tax bill of £50k (derived from salary

of £142,185) •  50% of investment (i.e £50,000) is reduced from

investor’s tax bill •  Tax bill = £0

•  CGT Reinvestment Relief •  Investor reinvests £100k gain under SEIS in tax year

12/13 •  Investor’s gain is not subject to CGT at marginal rate


What are the specific reliefs under SEIS?

•  50% income tax relief up to an annual investment limit of £100,000

•  Roll back relief to previous tax year

•  CGT reinvestment relief on reinvestment of gain on disposal of assets or shares 2012/2013 tax year only. No deferred gain permiMed

•  CGT relief at 100% on disposal of SEIS shares aeer 3 years

•  Loss relief at 100%


What are the Company requirements? SEIS

•  Gross assets not exceed £200,000 immediately prior to issue of shares

•  Unquoted

•  Exists solely for purpose of carrying on a qualifying acKvity

•  Qualifying trade. NB royalKes and license fees

•  Independent i.e not a 51% subsidiary

•  No EIS/VCT investment prior to issue of SEIS shares

•  Purpose of share issue to carry on qualifying acKvity and must be used within 3 years

•  UK permanent establishment

•  Less than 25 full-‐Kme employees

•  £150,000 investment limit over the lifeKme of the Company

•  Not in financial difficulty


What are the Investor requirements? SEIS

•  Investment must be made for genuine commercial reasons and not for tax avoidance purposes

•  Investment must be paid up in full, in cash and before the shares are issued

•  No reciprocal arrangements with a third party

•  Shares held for no less than 3 years

•  No stake higher than 30% prior to or during SEIS period •  Issued share capital/voKng rights •  EnKtlement to assets on a winding up

•  Not an employee during 3 year period (or prior to the 3 year investment period). Can be a paid director but the 30% rule applies


Structure

•  Full-‐risk ordinary shares

•  No debt/converKble debt

•  No preference shares

•  No redeemable shares


Procedure

•  Advance assurance

•  Company issues compliance statement

•  HMRC issues cerKficate

•  NB withdrawal of relief •  Disposal within 3 years •  Grant of call opKon •  Receipt of value – repayment/redempKon/repurchase of

share capital, repayment of debt, release investor from liability, provide asset at less than market value

•  Relief may be withdrawn if a paid director under SEIS invests under EIS. Safer approach to be an unpaid director under SEIS and later become a Business Angel under EIS


•  Fixed fee services

•  IncorporaKon

•  Shareholders’ Agreements, Founders’ Agreements

•  Investment and security documentaKon

•  Website terms and condiKons, privacy policy

•  Customer contracts

•  M&A transacKons

•  Further InformaKon •  Take our free “IntroducKon to startup law” booklet •  Check out our website at www.buckworthsolicitors.co.uk

How can we help?

Berkeley Square House | Berkeley Square | Mayfair | London W1J 6BD


Education

Buckworth Solicitors taking advantage of seis