Many people don’t know that non-UK companies can offer investments to UK investors which qualify for the Enterprise Investment Schemes (SEIS and EIS). It doesn’t matter if your startup is based in France, Germany, Spain, Italy, Estonia, the US – or anywhere! It’s possible.
In this post, we explain how non-UK companies can qualify for SEIS / EIS and become much more attractive to UK investors.
- Register as an overseas company
- Does your company have a UK fixed place of business?
- Does your company have a UK agent?
- Maintain your UK establish for at least three years
- Non-UK parent or holding company: how to to take SEIS / EIS investment
- Non-UK subsidiary with a UK holding or parent company: how to to take SEIS / EIS investment
- Talk to an expert
Register as an overseas company
To qualify for SEIS / EIS, your company doesn’t need to be incorporated in the UK, but it does need to register as a having a permanent establishment in the UK.
There’s a full description of how HMRC defines a UK permanent establishment on the gov.uk website – in brief, it means either:
- the company has a fixed place of business in the UK, through which the company’s business is wholly or partly carried out
- the company has an agent who has authority to enter into contracts on behalf of the company, and regularly does this
Below in this post, we’ll look at what exactly HMRC means by fixed place of business and agent.
As well as meeting one or both of these criteria, you’ll need to register as an overseas company in the UK within one month of establishing the business filling in the OS IN01 form and sending it to Companies House. There are full details on how to do this at the gov.uk website.
Does your company have a UK fixed place of business?
A fixed place of business in the UK is defined as any place of work, for example a branch, office, factory, workshop or project site where an essential or substantial part of your business is carried out.
This means the business activities your company carries out in the UK can’t be auxiliary or preparatory. HMRC give some examples of activities which might be considered auxiliary or preparatory:
- storing or displaying goods or merchandise belonging to the company
- maintaining stock owned by the company for storage, display, or delivery
- purchasing goods or merchandise or collecting information for the company
- maintaining stock owned by the company for the purpose of processing by another person
HMRC deliberately doesn’t give an exhaustive list of auxiliary or preparatory activities – they review every SEIS / EIS application from non-UK companies individually. When you’re completing your application for SEIS / EIS Advance Assurance or SEIS / EIS Compliance, make sure you state the reasons why you believe a substantial part of your business activity is carried out in the UK. You can put this on the application form or in a separate letter.
In our experience, HMRC will expect at least some sort of physical presence in the UK. A PO box or virtual office won’t be sufficient. As evidence, HMRC will want to see the lease of the property. If you’re working from a WeWork or co-working space, then your contract for the co-working company will do.
Does your company have a UK agent?
Another way of qualifying for SEIS / EIS as a foreign company is by having an agent working for you in the UK.
A UK agent is defined as a person who can exercise their authority in the UK to enter into contracts on behalf of your company. Merely maintaining an employee in the UK is not enough.
This means the agent must plan to, or already has, repeatedly entered into contracts that bind the company. The contracts must be to do with the substantive business of the company and not related to activities which are auxiliary or preparatory. The definition of auxiliary and preparatory is the same as above.
If you have a UK agent, make sure you explain this clearly in your SEIS / EIS application and submit evidence.
If you have one or more of your company directors resident in the UK, then that’s usually sufficient to count as an ‘agent’ in the UK because directors can enter into contracts on behalf of the company. As evidence, HMRC will want to see the employment contract for the director(s).
Maintain your UK establish for at least three years
To make sure investments in your company stay eligible for SEIS / EIS, your company must maintain your permanent establishment in the UK for three years from the date trading started, or from the date you issued the SEIS / EIS shares.
SEIS/EIS Advance Assurance
Attract UK investors with SEIS and EIS
Prove investments in your non-UK company qualify for SEIS / EIS tax relief. Apply for Advance Assurance with the help of our experts.Get started
Non-UK parent or holding company: how to to take SEIS / EIS investment
An overseas-registered parent or holding company must itself have a permanent establishment in the UK to qualify for SEIS / EIS – the parent can’t just have a subsidiary resident in the UK.
Investments won’t qualify for SEIS / EIS if they’re taken into the subsidiary because SEIS & EIS investment must be taken into the TopCo.
Non-UK subsidiary with a UK holding or parent company: how to to take SEIS / EIS investment
If you have a UK parent or holding company (also known as a TopCo) and the administrative and management functions of your company are based in the UK, your company is likely to qualify for SEIS/EIS. The business of your subsidiaries doesn’t need to be carried out in the UK.
If you’re taking investment into both your holding or parent company and subsidiary company, for the investment to qualify for SEIS / EIS, it must be taken into the holding company.
You can then use the money to carry out a qualifying trade in a foreign subsidiary, as long as the parent company owns 90% or more of the subsidiary.
Talk to an expert
If you’re thinking about getting SEIS / EIS Advance Assurance for a non-UK company, we can help. To talk to one of our experts about the information you’ll need to give in your application, and how to maximise your chances of being given Advance Assurance by HMRC, book a free call.