Clarification on SEIS for new family owned business

Clarification on SEIS for new family owned...

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Hi all.

I have been researching SEIS as a way to raise money for a relative's business. Please forgive my lack of tax understanding, I'm posting to try and get some feedback as the SEIS scheme seems to have lots of potential pitfalls in terms of restrictions etc.

The proposed new co. share distribution is as follows;

Pre-SEIS shares

Sister 1 - 50%
Sister 2 - 50%

Post-SEIS shares

Sister 1 - 37%
Sister 2 - 37%
Sister 3 - 26% (for £12k investment)

All 3 sisters will be shareholders only. They will not be employed by, or hold any office, of the company. Daughter of sister 3 will be a Director of the company and will receive a salary. The trade will be a marketing/service company.

Reading through the HMRC rules around SEIS I think this would be OK?

Replies (3)

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paddle steamer
By DJKL
21st Feb 2015 01:05

Does this not negate due to associates aggregation
http://www.hmrc.gov.uk/manuals/vcmmanual/vcm32030.htmITA07/S257BB

In order to qualify for SEIS relief, an investor must not have a ‘substantial interest’ in the company at any time from incorporation of the company to the termination date (period A -VCM31140)

Top of page

ITA07/S257BF

‘Substantial interest’ is defined as the investor directly or indirectly possessing, or having an entitlement to acquire more than a 30 percent stake in the company via

ordinary or issued share capital,voting power,rights on winding up, oras having control of the company (see below).

Shareholdings of associates are taken into account in arriving at the 30 percent figure. For the meaning of ‘associate’ see VCM32020.

An individual is not regarded as having a substantial interest in a company for this purpose, if the company has issued only subscriber shares (that is, those issued as part of the procedures via which the company is registered at Companies’ House) and the company has not yet begun to carry on any trade or preparations for any trade. (ITA07/S257BF(5)).

‘Control’ for this purpose uses the definition at ITA07/S995. That is, the power of any person by means of the holding or shares or voting power, or as a result of any powers conferred by a document regulating the company or any other company, that the affairs of the company are conducted in accordance with the person’s wishes.

Thanks (1)
By Marion Hayes
21st Feb 2015 12:16

@DJKL

SEIS regs do not include brothers and sisters as associates - sister 3 will never have held more than 30% so would qualify - if all other conditions are met - but Sisters 1 & 2 would not 

Thanks (1)
Replying to Duggimon:
paddle steamer
By DJKL
21st Feb 2015 14:12

My apologies

Marion Hayes wrote:

SEIS regs do not include brothers and sisters as associates - sister 3 will never have held more than 30% so would qualify - if all other conditions are met - but Sisters 1 & 2 would not 

Serves me right for posting the HMRC link re SEIS and associates et al at a silly time in the morning without reading it properly!!

Apologies to the OP and thanks.

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