In September 2022, the UK Government announced improvements to the tax-efficient Seed Enterprise Investment Scheme (SEIS) scheme, which gave investors the chance to invest twice as much per year. Investors could now invest £200,000 per year, up from £100,000. The goal of SEIS investment is to boost economic growth in the UK, promoting new enterprises and entrepreneurship at the earliest stage.
Days later, Haatch launched the UK’s first SEIS fund, intending to benefit from the near doubling of investment limits. Every Haatch SEIS investment from this point has also been bolstered by an additional £60,000 of British Business Investments money, giving start-ups a boost on their investment journey.
Haatch’s SEIS Fund invests in a portfolio of between 10-15 pre-seed technology companies, which is less than 5% of the companies they review. Since launching their SEIS fund, the company has utilised their vast experience, based on the team’s successful entrepreneurial exits and investments over the past decade.
Over the years, Haatch has more often than not led their businesses from £0 in revenue to collectively more than £100m+. Founders often seek Haatch out for support, choosing them because of their strategic value. This comes down to their determination to focus on assisting portfolio companies in building scalable sales machines to reach their first £1m of annual recurring revenue. The first Haatch SEIS Fund is now valued at a 170% increase, based on the last third-party fundraising rounds.
SEIS has become increasingly popular over the last few years for investors. In 2021-2022, more than 2,000 businesses raised a total of £205 million in funds under the SEIS scheme. Of those companies, around 1,815 were using the SEIS scheme to raise funds for the first time, which is amounted to £179 million worth of investments.
Fred Soneya, Co-Founder & Partner at Haatch, comments:
“I continue to be excited by our ability to find, invest in and support early-stage companies, often as first-cheque investors, across our EIS and SEIS portfolios, and see them graduate to their next stages of growth with further backing by globally recognised venture funds.”
“Our first SEIS fund is already seeing global VCs leading seed rounds, resulting in strong uplifts, including Betmate at 5.8x, Odin at 3.3x, Ningi at 2.41x and Diode at 2.26x.”
Soneya cofounded Haatch in 2013, along with Scott Weavers-Wright OBE. Soneya is responsible for the day-to-day running of the company’s funds. He has led the completion of over 150 investments into 70+ companies, and the onboarding of more than 600 investors into these funds.
The benefits of SEIS, according to Haatch
SEIS investment offers a range of benefits to investors. Income tax relief of 50% can be claimed on investments, provided there is enough income tax liability to cover it. This can reach up to £200,000 in one tax year. However, the shares must be held for a minimum of three years from the date of issue.
Any gain is Capital Gains Tax (CGT) exempt, provided the shares are held for a minimum of three years and the income tax relief has been claimed. This means that, provided they meet SEIS requirements, exits on investments attract 0% tax.
Another benefit of SEIS is the assurance of loss relief. If you make a capital loss, you can set it against your capital gains in the same year. While it will not reverse all of the damage, it will provide some respite.
CGT can also be reduced on gains made elsewhere by up to 50%, as long as the investor has had income tax relief in that same year.
SEIS investment is also boosted by inheritance tax exemption. Shares in qualifying companies provide 100% inheritance tax relief after two years, therefore any liability for IHT is reduced or eliminated.
Lastly, Haatch’s fund is open to international investors, who can apply using the same process as UK residents. However, international investors must undergo additional AML checks, and their investments will not qualify for SEIS relief, with local tax laws applying.
The tax benefits of SEIS depend on the individual circumstances of each client and may be subject to change in future.