Enterprise Initiative Scheme (EIS) / SEIS company formation

[shopper150]

I’m looking to form an EIS or SEIS company before the end of this tax year.

Are there any experts out there that can provide advice on how to do this within the rules?

My understanding is that as an investor, I cannot be a director at the time of company formation and the shares need to be fully paid up into the bank account before they are issued at companies house.

[Wilmslowboy]

Just going through this myself, I can't recommend my accountant/tax advisor (just yet) as I am not through the process.

On your point about 'this tax year', I was advised the following (which appears taken from the BDO website).

said:

After the shares have been issued, and the Company has traded for four months, the Company makes a declaration on a form EIS1, and provides details of the investors to HMRC. All being well, the company will be authorised to issue the EIS3 certificate to investors, enabling them to claim their tax reliefs.

[aceparts]

From memory the rules have recently changed and the company can’t be expected to make a profitable return in order to be approved. I think it’s something that is not exactly carved from granite in terms of rules!

[shopper150]

aceparts said:

From memory the rules have recently changed and the company can’t be expected to make a profitable return in order to be approved. I think it’s something that is not exactly carved from granite in terms of rules!

So you have to expect to lose money?

[TNJ]

Not true - what you cannot have is a guaranteed return for the investor. You will have to explain to HMRC why the company is a high risk investment and why there is a genuine chance that the investor could lose their money - they do not want people investing in "safe" businesses such as those which are backed by valuable assets such as property.

I deal with EIS all the time and it is some of the most complex tax legislation that we have - the sceptic in me thinks it is designed to make you slip up and fail to qualify

I probably spend more time helping clients to try and put right what they got wrong when they tried to keep costs down and do it themselves. For EIS, you really need to pay a professional to do it properly - it is a minefield.

[Rich135]

I would agree with the above, and I paid a rather expensive accountant in London to do it for me to ensure I didn't fall foul of any rules (I am now a director of the company I invested in).

I believe you have to "use" the funds you are investing into the company, and actually spend them on a significant project or advancement of the company, which you hope will provide greater returns, but obviously that isn't guaranteed.

So they will want to see the bank balance dip after you put your funds in, and before it starts climbing again.