These are the reasons why more IFAs are turning to early-stage investing through SEIS
Investment landscapes perpetually shift, propelled by myriad factors such as fluctuating interest rates, inflation, equity market volatility, and geopolitics. The Seed Enterprise Investment Scheme (SEIS), recently bolstered by the Government's legislative enhancement, now surfaces as an increasingly appealing avenue for investors, allowing up to £200,000 of annual investment into a broader spectrum of businesses.
Here, we explore the increasing movement of Independent Financial Advisors (IFAs) toward looking for opportunities to invest through SEIS in early-stage investing strategies for their clientele.
1. Compelling Tax Benefits
SEIS stands out, arguably, as one of the most enticing tax benefit schemes globally. The scheme offers 50% income and capital gains tax relief, capital gains reinvestment relief, and inheritance tax relief, thereby mitigating the capital risk of investment since a notable portion of the investment is redeemed through tax relief within the same fiscal year.
- 50% Income Tax relief
- 50% Capital Gains reinvestment relief into SEIS businesses
- 100% Inheritance Tax relief on shares held for 2 years
- 0% Capital Gains Tax on profits from SEIS shares
- Loss Relief at marginal rate should a business fail
2. Improved Risk Profile
Recent changes to the SEIS scheme allow companies to raise under the scheme within 3 years of trading rather than the previous 2 years. This means a more diverse and mature market of Startups available, significantly improving the risk profile for investors.
3. Increased Investor Limits
The rule updates also doubled the amount investors can invest each year to £200,000. When you consider the ability of investors to carry-back the tax relief to the previous tax year, that means an investor could theoretically invest £400,000 under SEIS in just one year. For IFAs, the new limit opens the door for SEIS to become a highly effective tax planning tool for HNWIs.
4. Attract New Clients
Last year, a combined £2.5bn was invested under SEIS and EIS by roughly 50,000 investors. By incorporating unique investment opportunities, like SEIS with its distinctive tax benefits, into their value proposition, IFAs not only substantiate their role but also acquire a competitive advantage, enabling them to penetrate new client segments with a predilection for higher-risk and innovative investment.
5. Efficient Performance Tracking
The busy life of an IFA means that convenience must be king. The better SEIS funds will offer investor portals to help manage portfolios, enabling real-time investment tracking and storing of important information and certificates. While updates from an early-stage company may not mirror the constant fluctuations of the stock market, pertinent information, when made available, is instantly visible.
Conclusion
A growing number of IFAs are steering their clients towards investing through SEIS, enticed not only by its generous tax benefits but also as it affords an additional diversification layer. For advisors, SEIS emerges as an engaging means of integrating early-stage investing into their value proposition, thereby accessing new client demographics.
The simplicity of the investment process is facilitated by many funds and is further eased by SEIS regulations, which streamline the due diligence process. Through specialised portals, investors can also efficiently track the real-time performance of their, or their clients', investments.
If you are an advisor or investor, please complete the registration form here, or connect with our Head of Investor Relations, Ed Prior, here.
Capital at risk. For professional investors only.
Tax benefits are subject to individual circumstances. Subject to changes.
.png?width=2000&height=318&name=SFC%20Logo%20%2B%20Title%20x%20web%20(white).png)
.png?width=600&height=296&name=Young%20talent%20(1).png)
