SEIS and EIS fuels the UK startup scene, the vast majority of early-stage UK funding rounds have at least one SEIS or EIS investor. Being able to offer SEIS or EIS tax breaks to your investors dramatically increases your ability to attract angel investment.
Before your funding round that means applying for SEIS Advance Assurance, which provides investors with an assurance from HMRC that they will get their SEIS or EIS tax deductions later.
But, Advance Assurance is just a comfort letter from HMRC, before your investors can actually claim their tax breaks you’ll need to issue them with an SEIS3 or EIS3 certificate. Here’s how it works:
- Complete your funding round, take in SEIS and EIS investments
- As soon as the round closes, issue your investors their share certificates, each dated a day after you received their money.
- Then, wait until the sooner of these two events have occurred:
a) you’ve spend at least 70% of the SEIS monies you received, or
b) the business has been trading for at least 4 months
- As soon as the earliest of these two have occurred, you can now start the process for claiming your investors' SEIS/EIS.
- That’s known as filing for SEIS/EIS Compliance, and involves filling in an SEIS1/EIS1 form, and posting it to HMRC
- HRMC then examine your compliance application and, if all is okay, they send you an SEIS2/EIS2 certificate, which includes an Authorisation Number.
- That Authorisation Number now allows you to issue SEIS3/EIS3 certificates to your investors
- Finally, once they have these certificates, investors are now able to file tax returns claiming their SEIS/EIS tax deductions.
It’s a safe bet that starting a few weeks after your funding round, and definitely as the tax year end approaches, your investors are going to start hounding you for their SEIS3/EIS3 certificates, after all those tax deductions were a key reason they invested in your company.
Creating these forms used to be hugely complex and time-consuming:
- an SEIS1/EIS1 form had to be completed for every share class and every share issue date, with complex cap table information.
- then, once the SEIS2/EIS2 authorisation code has been received, a 3-page SEIS3 and EIS3 certificate had to be filled in by hand, one for every investment in your round. If 10 investors had a mix of SEIS and EIS investments, that could be 20 forms, to be filled in by hand and posted to investors.
SeedLegals revolutionises the whole process, replacing all that form-filling and manual calculation of share numbers with a single integrated process. Simply fill in some questions, and SeedLegals will generate every required SEIS1/EIS1 form for you in an instant, just click to e-sign each, download as PDFs, and post to HMRC.
Then, when you get your SEIS2/EIS2 authorisation number back, just come back here, paste it in, and we’ll instantly generate every SEIS3/EIS3 certificate. You can e-sign them all in one click, and then they’re instantly put into the Documents folder for each investor. That’s it!