A pitch for finance for your business should:
- be well-prepared
- be confidently presented, with full details of the business included
- present past and projected financial performance
- provide details on target markets
- highlight the business’s goals and aspirations.
The investor needs to be convinced as to the viability of the business; that there is an understanding of the business risks; and that the business is able to provide them with an adequate return on their investment.
The Seed Enterprise Investment Scheme (SEIS) is administered in HMRC by the Small Companies Enterprise Centre (SCEC). A company can receive advanced agreement that its proposal will qualify for the scheme.
The SCEC decides if a company and a share issue qualify for the scheme, and it is also responsible for monitoring companies to ensure that they continue to meet the requirements of the scheme for the duration of the qualifying period for any share issue.
HMRC operates an advance assurance facility for SEIS. This facility allows companies to submit details of their plans to raise money, their structure and their activities in advance of an issue of shares, so that the SCEC can advise on whether or not the proposed share issue is likely to qualify for relief.
- Before investors can claim any tax relief, the company must complete form SEIS1 and send it to the SCEC. The company cannot submit an SEIS1 until:
it has been trading for at least four months; or
- if not yet trading, it has spent at least 70% of the monies raised by the relevant issue of shares.
If the SCEC accepts that the company, its activities, and the shares all meet the requirements of the scheme, it will issue a certificate to that effect, and supply tax relief claim forms that can be sent to the investors.
This process must be followed for every issue of shares where it is intended SEIS relief will be claimed.
The investor will keep a close eye on all aspects of the business’s performance to ensure that its objectives are being met and that the return on investment is maximised. It is important to retain a good relationship with the investor, which will influence their willingness to provide further finance at a later date, if required.
One of the biggest problems with the SEIS scheme is that there are many rules to comply with and if one or more of them are broken legislation provides for a complete withdrawal of tax reliefs. This could result in the investor being faced with an unexpected tax liability.