Disclaimer
Please note, company introductions through SFC Capital Ltd ('SFC') are only suitable for ‘High Net Worth Individuals’, or ‘Sophisticated Investors’ as defined by the Financial Services & Markets Act 2000 (FSMA) who are familiar with and willing to accept the high risk associated with private investments. Any investor requesting to contact a company through SFC Capital does so at his/her own risk and is solely responsible for conducting any legal, accounting or due diligence review. There has been no investigation to the accuracy of any information or terms contained herein and we strongly suggest that you seek advice from a person authorised under the FSMA who specialises in advising on investments of this kind prior to commencement of any potential transaction. All content provided by SFC Capital is strictly for informational purpose only and does not constitute business, financial, investment, hedging, trading, legal, regulatory, tax or accounting advice or services. SFC Capital is an appointed representative of SFC Capital Partners Ltd which is authorised and regulated by the Financial Conduct Authority (‘FCA’) in the United Kingdom (FRN 736284). This website is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. SFC Capital does not sell or offer to sell any securities and no information provided by SFC Capital is intended to constitute or to be interpreted as any such offer. SFC Capital simply provides an introductory service where potential partners of all sorts can meet.
The SFC Angel Fund is managed by SFC Capital Partners Ltd (‘SFCCP’) which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, firm reference number 736284. Information on the Fund is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R. Any decision by an investor to buy shares in a fund must be made solely on the basis of the information and terms contained within the Fund’s offering memorandum. Investment in the Fund is made entirely at the investor’s own risk and professional advice should be sought in case of doubt.
SFC Capital Partners Ltd (‘SFC’) is authorised and regulated by the Financial Conduct Authority (‘FCA’) in the United Kingdom, firm reference number 736284. This document is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R.
The SFC Angel Fund is managed by SFC Capital Partners Ltd (‘SFCCP’) which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, firm reference number 736284. Information on the Fund is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell the securities mentioned herein. The SFC Angel Fund (the ‘SFC Fund’ or the ‘Fund’) is defined as an ‘unregulated collective investment scheme’ (‘UCIS’) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only directed at professional clients and eligible counterparties as defined by the FCA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act 2000 and COBS 4.12.4R. Any decision by an investor to buy shares in a fund must be made solely on the basis of the information and terms contained within the Fund’s offering memorandum. Investment in the Fund is made entirely at the investor’s own risk and professional advice should be sought in case of doubt.
The SFC Angel Fund is an SEIS/EIS fund which raises money for early-stage businesses by investing in SEIS and EIS eligible ventures with the aim of returning a profit for investors in the fund. Investment in early-stage companies involves risks such as illiquidity, lack of dividends, loss of investment and dilution. Investment in SEIS/EIS funds should be considered as part of a diversified portfolio. The availability of tax relief depends on individual circumstances and may change in the future. The availability of tax relief depends on the company invested in maintaining its SEIS/EIS qualifying status. There is no assurance that the investment objectives of any investment product will be achieved or that the strategies and methods described herein will be successful. Past performance is not necessarily a guide to future performance and the value of an investment may go down as well as up. Investors may not get back the full amount invested. No warranties or representations of any kind are expressed or implied on this website.
Risk Warning
Don’t invest unless you’re prepared to lose all your money invested. This is a high-risk investment. You could lose all the money you invest and are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
If you are interested in learning more about how to protect yourself, visit the FCA’s website.
The Enterprise Investment Scheme (EIS) is a government-supported initiative aimed at encouraging investment into British private businesses.
Launched in 1994, EIS provides a range of tax reliefs to investors who allocate capital to eligible companies, including a 30% income tax relief.
Tax benefits are subject to individual circumstances and subject to changes.
30% under EIS. Possibility to carry back the relief to the previous tax year. You can invest up to £2,000,000 per year under SEIS and receive up to £600,000 in tax relief.
Provided shares are held for at least three years, you will pay no capital gains tax on any profits you make from the sale of EIS shares.
If you make a loss on an EIS investment, you can offset that loss against your income tax at your marginal tax rate.
There is no inheritance tax to pay on shares bought through EIS as long as they have been held for at least two years.
EIS allows you to defer a capital gain.
UK residents who are non-UK domiciled can invest via EIS and bring in overseas capital without a UK tax charge.
In the early 1990s, the UK was recovering from a recession, grappling with high unemployment rates and sluggish economic growth. To combat these challenges and stimulate the economy, the government introduced the Enterprise Investment Scheme (EIS) in 1994. EIS was designed to encourage investments in small, high-risk companies by offering significant tax reliefs to investors, thus supporting businesses that might otherwise struggle to secure funding.
Initially, EIS provided a 20% income tax relief, which has since increased to 30%, making it a more attractive proposition for investors. The scheme also offered capital gains tax relief and loss relief, further reducing the financial risk for investors. Unlike SEIS, EIS was targeted at slightly larger companies, allowing firms with up to 250 employees and £15 million in assets to qualify.
Over the years, EIS has been amended and expanded to better serve the evolving needs of businesses and investors. For instance, in 2012, the same year SEIS was launched, the government increased the maximum investment limit and expanded the range of qualifying trades. These changes aimed to make EIS more flexible and accessible.
EIS has played a pivotal role in the UK's economic landscape, channelling billions into thousands of companies. By the end of the 2021-2022 financial year, EIS had helped approximately 31,365 companies raise over £24 billion. The scheme's impact is particularly notable in sectors like technology and healthcare, where it has supported numerous innovative startups and scale-ups.
While EIS has generally been well-received, it has faced scrutiny over its complexity and the potential for abuse. Nevertheless, the government has continued to iterate on the scheme, striking a balance between encouraging investment and ensuring fiscal responsibility.
EIS has significantly contributed to job creation and economic growth across the UK, particularly in regions with strong entrepreneurial ecosystems. By enabling more people to invest in small companies, EIS has not only helped businesses thrive but has also democratised investment in the UK. Despite the challenges and criticisms, EIS remains a cornerstone of the UK's strategy to foster innovation and support small businesses.
Here are some criteria investors should be aware of when considering EIS funds.
Here are some criteria companies should be aware of when considering EIS funds.
Check out the potential scenarios on the right.
Tax benefits are subject to individual circumstances. Subject to changes.
Victoria invests £50k
Investor receives $X in tax relief
Company succeeds
-or-
Company fails
EIS has a vast array of tax reliefs. This minimises the capital at risk for investors in a higher-risk startup environment.
In the case of an investor investing £20,000 through EIS, they will get an immediate £6,000 back in income tax relief in their following tax return, which reduces the net cost of investment to £14,000. Also, if the company fails and the share price goes to 0, the investor gets an additional £6,300 back (this is based on a 45% tax rate, amount varies).
In the case the company is a success and increases its share price by 3x return, the shares will now be worth £60,000. Based on the cost of investment of £14,000, the net return of this investment would be 4.3x, and the investor would also not pay any capital gains tax on the investment.
Tax benefits are subject to individual circumstances. Subject to changes.
In the case of an investor investing £20,000 through EIS, they will get an immediate £6,000 back in income tax relief in their following tax return, which reduces the net cost of investment to £14,000. Also, if the company fails and the share price goes to 0, the investor gets an additional £6,300 back (this is based on a 45% tax rate, amount varies).
In the case the company is a success and increases its share price by 3x return, the shares will now be worth £60,000. Based on the cost of investment of £14,000, the net return of this investment would be 4.3x, and the investor would also not pay any capital gains tax on the investment.
Tax benefits are subject to individual circumstances. Subject to changes.
Try out our EIS Calculator by following these steps. Try adjusting the EIS Expected Investment Portfolio Performance slider and see the effect displayed in the Expected Investment Performance Table below and the bar chart to the side.
Tax benefits are subject to individual circumstances. Subject to changes.
There are two main approaches to investing in startups: Direct Investment, for hands-on involvement, and Fund Investment, for those preferring expert-managed portfolios:
Angel Investors, often known as Direct Investors, allocate funds directly into startups. This approach requires you to identify, decide on, and manage investments personally. It is suited for individuals with the necessary time, access, and expertise to pinpoint and oversee potential successes. Being an Angel Investor is an active role, requiring your direct involvement.
Investors in funds entrust their capital to the expertise and networks of SEIS & EIS Fund managers. By pooling your resources with those of other investors, the Fund invests in a portfolio of startups on your behalf. This method offers diversified investment, mitigates risk, and provides access to high-quality startups, which may be beyond the reach of most Direct or Angel investors.
When selecting an EIS fund, consider:
One of the most important things to do after the investment in either a company or a fund is to claim your tax relief. When investing through a fund, the fund manager will provide the EIS3 forms necessary for tax relief claims. When investing directly, the companies will supply these.
Once the EIS3 certificates are available, you will be able to claim your tax relief from HMRC as part of your self-assessment tax return. If you wish, you can carry your tax relief to the previous tax year as well. We recommend that you seek professional advice if you are unsure of your personal circumstances. Tax benefits are subject to individual circumstances. Subject to changes.
After investing through a fund, the fund manager will provide the EIS3 form necessary for tax relief claims.
Steps include:
Details required for the tax return include Unique Investment Reference, investee company name, investment amount, date of share issue, and potentially the EIS3 forms.
It can usually take between 5 days and 8 weeks to receive the tax refund in your accounts.
Another important option to keep in mind is the carry back option. Under EIS, you are able to backdate some EIS investments to the preceding tax year.
For queries, contact HM Revenue & Customs.
Set up a system to track your investments. Many funds offer portals for easy access to investment overviews, valuations, and company reports. Remember, early-stage startups may take time to show significant returns due to initial heavy investments in product development.
The SFC All Star Fund EIS targets the Top 10% performers of SFC’s portfolio. The fund invests in companies with exceptional founding teams, proven commercial traction and strong growth potential.
More details are available to investors only. Please log in to register interest or apply to the fund. If you are a new investor, please register to join our network.
EIS carry back allows investors to apply a portion of their investment against their income tax bill in the previous tax year, potentially reducing the amount of tax they owe.
SEIS is designed for investing in very early-stage companies, offering higher tax reliefs to reflect the increased risk, while EIS is for more established businesses. The right choice depends on your risk tolerance and the stage of businesses you're interested in.
A business can qualify for both SEIS and EIS by first raising funds under SEIS to the maximum allowance and then moving on to EIS for subsequent funding rounds, subject to meeting specific conditions for each scheme.
Ineligible sectors for EIS include finance, property development, and legal services, among others, due to their non-qualifying business activities.
Potential risks for investors include the loss of capital, liquidity risk (difficulty in selling shares), and the risk of losing tax relief if the company or investor fails to comply with the schemes' conditions.
Rules for spending EIS funds require that the investment is used for qualifying business activities, such as development or expansion, within specific time limits.
The timeline for using EIS investment is generally within 3 years for EIS, to support growth and development activities.
Exit strategy restrictions under EIS include maintaining the investment for a minimum of three years to retain tax reliefs, with few specific restrictions on the form of exit.
Selling SEIS or EIS shares can be done after holding them for a minimum of three years, and any gain may be exempt from capital gains tax if all conditions are met.
Using SEIS and EIS with other funding is possible, but care must be taken to ensure compliance with the schemes' conditions, especially regarding the ownership and independence of the company.
If a company becomes ineligible after investment, investors may lose their tax relief, although this depends on the timing and reasons for the ineligibility.
Claiming both SEIS and EIS in the same year is possible, provided the investor has not exceeded the annual investment limits for each scheme and the investments meet all other conditions.
Common reasons for failing to qualify include exceeding the asset or employee limits, conducting disallowed activities, or not planning to spend the funds on qualifying business activities.
Applying for SEIS and EIS involves the entrepreneur submitting an application to HMRC to receive advance assurance, which helps attract investors by confirming the company's eligibility.
DISCLAIMER:
SFC Capital Ltd (SFC) is an appointed representative of SFC Capital Partners Ltd which is authorised and regulated by the Financial Conduct Authority (‘FCA’) in the United Kingdom (FRN 736284). This website is intended for professional investors only; any reproduction of this information, in whole, or part, is prohibited. The content is for information purposes only and should not be used or considered as an offer or solicitation to purchase or sell any securities.
Investment in early-stage companies involves risks such as illiquidity, lack of dividends, loss of investment and dilution. Investment in SEIS/EIS eligible companies should be considered as part of a diversified portfolio. The availability of tax relief depends on individual circumstances and may change in the future. The availability of tax relief depends on the company invested in maintaining its SEIS/EIS qualifying status. There is no assurance that the investment objectives of any investment opportunity will be achieved or that the strategies and methods described herein will be successful. The investment products cited herein may place capital at risk and therefore investors may not get back the full amount invested. Past performance is not necessarily a guide to future performance and the value of an investment may go down as well as up. Investors may not get back the full amount invested. Companies’ pitches for investment are not offers to the public and investments can only be made by members of SFC Capital. SFC Capital takes no responsibility for this information or for any recommendations or opinions made by the companies. Neither SFC Capital nor any of its employees provide any financial or tax advice in relation to the investments and investors are recommended to seek independent financial and tax advice before committing. This website is not directed at or intended for publication or distribution to any person (natural or legal) in any jurisdiction where doing so would result in contravention of any applicable laws or regulations. No warranties or representations of any kind are expressed or implied herein. This material is confidential and is the property of SFC Capital.
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