I am looking to set up a hedge fund for myself and wanted to set it up as an LLP for transparency and limited liability but at the same time get all the SEIS / EIS benefits.
I have looked on the HMRC website but it appears to suggest that the fund manager needs to be FSA / FCA regulated meaning they would need to have some sort of trading qualification. I can understand this if they are dealing with other people's money but I would only be using my own money. As an individual, I can receive the EIS benefits but was wondering if I can do this as an LLP?
Thanks
Mick
Replies (7)
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"As an individual this 30% rule does not apply"
Not sure what you mean but
1. Restriction for connected individuals
Between the period commencing two years before the issue of EIS shares and the later of three years after the investment was made and the date the company commences trading, an individual investor cannot be ‘connected’ with the qualifying EIS company. He or she cannot:
Be remunerated as a company employee, partner, or director (unless an unremunerated director, or potentially a paid ‘business angel’ investor), or
Directly or indirectly possess or be entitled to acquire more than:
30% of the ordinary share capital, or
30% of voting rights, or
30% of the rights to assets on a winding up
Of the company or any subsidiary.
These rules are subject to exceptions for unpaid directors, and paid business angel investors (see s167-s169 ITA 2007), which broadly permit payment for services as a director once the shares have been issued. It is advisable to become a director only once shares have been issued. Any director involved in the company's trade prior to issue is likely to be connected and relief will be denied.
Source http://www.rossmartin.co.uk/companies/seis-eis/560-enterprise-investment...
Also 'many financial activities' are excluded from EIS
Why do you think EIS/SEIS is available?
I understand that EIS relief is not available for investments made through an LLP, unless the LLP holds the shares as nominee for the individual investor (in which case limited liability protection would probably be lost).
The EIS fund is essentially to enable an early claim to EIS relief on cash invested in an approved fund (which may then take some time to invest in the investee companies).
It's not clear from your post why you would want to structure this as you're proposing. If you want to use your own money to make EIS qualifying investments then you invest directly. The purpose of the tax relief is to mitigate your investment risk. An EIS approved fund is not, in fact, structured as a traditional investment fund: it's merely a nominee arrangement which the EIS legislation provides for, to allow an investment manager to invest as a nominee on behalf of multiple investors. The concept doesn't exist legislatively for SEIS.