Enterprise Investment Schemes: The CROWDJET TM Introductory Guide To The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS)

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01 | Introduction To EIS

When it comes to investments, there is a lot to consider. You may want to look for investments with high-return potential and the lowest risk exposure. You may also want to support causes that matter to you personally and structure your investments to be as tax effi cient as possible. In order to maximise the value of your assets, balancing tax effi ciency and investment potential is crucial.

To help you understand more about the Enterprise Investment Scheme this guide is designed to help you uncover whether Enterprise Investment Scheme is the right investment opportunity for you. The guide will cover

What is EIS?

Who is EIS for?

What tax advantages are available?

What are the conditions?

Is EIS right for you?

An investor’s guide to Enterprise Investment Scheme and the Seed Enterprise Investment Scheme. Understand the value of investing in young British fi rms and the tax incentives available.

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02 | What is EIS?

The History Of EIS

The UK government launched the Enterprise Investment Scheme in 1994. The idea behind it was to encourage private investors to support and stimulate entrepreneurship in the UK. With early-stage companies benefitting from investment support, the government incentivised investors with tax relief advantages.

Since 1994, the scheme has continued to grow and benefit businesses and investors. From 1994 until 2016, EIS stimulated £16.2 billion of investment to early-stage enterprises. In 2015/16, almost £1.9 billion was invested. Demand is continuing to grow for investors looking to increase their tax efficiency and compensate their potential pension restrictions.

Why does EI S exist?

EIS was set up to encourage investment into early-stage businesses. Typically, EIS-eligible companies will offer competitive returns on investment. Furthermore, investors will benefit from generous tax relief. As well as this, EIS enables you to create a diversified and balanced investment portfolio to minimise the risk.

For young companies, the ability to access investment funds for growth can help entrepreneurs to achieve their business goals and encourages more entrepreneurs with the level of support available.

03 | Who is EIS for?

The Enterprise Investment Scheme is developed for private investors who want to support the future of British businesses and the economy. It is ideal for those who have experience of direct investing and those who are comfortable with the level of risk and reward, particularly with the illiquidity of investing in unlisted businesses.

Who is EIS aimed at?

For early-stage businesses, the Enterprise Investment Scheme seeks to support ambitious entrepreneurs who are confident that they will be commercially successful. It helps enterprises which require investment for growth but may struggle to gain investment from traditional financial sources due to the limited trading history of the company. The Enterprise Investment Scheme is ideal for those willing to provide an equity stake which is typically appealing to investors..

The risk of EIS and illiquidity

Due to the early-stage and unlisted status of the companies, there is a higher risk. However, there is higher growth potential too. One of the ways to reduce the risk of EIS-eligible investments is to create a diversified portfolio to create a mix that mitigates risk.

It is essential, also, to remember that investment in EIS-eligible companies are illiquid. While EIS-eligible companies may be listed on the Alternative Investment Market, they are not listed on the main markets. Usually, investor exits for EIS-qualifying companies will be as a result of a management buyout or sale of the company.

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04 | What tax advantages are available?

Capital Gains Tax exemption

Investors are not required to pay Capital Gains Tax on profits from EIS investments. This is an addition to your annual tax-free capital gains allowance across all investments.

30% income tax relief

If you invest in Enterprise Investment Scheme-eligible companies, then you can enjoy up to 30% upfront income tax relief. This is against the current year’s tax bill or the last year’s bill by using a carryback facility.

Defer Capital Gains Tax

Investors are entitled to defer their Capital Gains Tax by investing in EIS-eligible companies, regardless of the source.

Loss relief

Should the investment in the EIS-eligible company sell for less than what you paid for it, you are entitled to loss relief. This works by offsetting income tax liability at the rate paid by the investor in the year of the sale.

Inheritance Tax exemption

As long as you hold an investment in an EIS-eligible company for at least two years prior to your death (and still hold it at your death), then your investments are exempt from Inheritance Tax.

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05 | What are the conditions of EIS?

For the tax reliefs to be available, certain conditions must be met;

Initial income tax relief, tax-free dividend payments, Capital Gains Tax deferral and loss relief is only possible if you hold the investment for at least three years

Inheritance Tax exemption is only available if you hold the investment at the time of your death and for at least two years prior.

Income tax relief at 30% is only available up to the £1,000,000 limit of investment with a maximum annual relief amount of £300,000.

06 | Is EIS right for you?

With an immediate income tax relief of 30%, investment into Enterprise Investment Scheme options are extremely attractive. You can then reinvest capital gains to defer liability and also limit the risk as much as possible with loss relief which can help to make investors feel more comfortable about investing in EIS-eligible b

For every investor, it is essential to find the right opportunity for you. At CROWDJETTM we want to celebrate individuality in investing and will work with you to present the right opportunity to suit your needs and investment objectives.

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THE SEED ENTERPRISE INVESTMENT SCHEME (SEIS)

01 | Introduction to Seed Enterprise Investment Scheme (SEIS)

If you are an investor looking for the tax-efficient investments, then EIS and SEIS may be the ideal option for you. With EIS, investors can enjoy 30% income tax relief. However, with SEIS you are able to claim 50% income tax relief by investing through the Seed Enterprise Investment Scheme.

Investors who back SEIS-eligible businesses through CROWDJETTM have the ability to claim 50% of the investment as income tax relief. Seed Enterprise Investment Scheme means that investors can support many early-stage companies who need the financial backing of investors.

02 | What is SEIS?

While EIS began in 1994, HM Revenue and Customs introduced SEIS in 2012 to complement EIS. The requirements for businesses wishing to be part of either scheme are different. EIS is available for businesses that are considered as medium-sized. This applies to UK businesses with 250 employees or less and with assets up to £15 million. For companies that want to be a part of EIS, they can raise no more than £5 million through investors.

In contrast, SEIS is available to businesses which are much smaller. As a seed enterprise, businesses eligible for SEIS must have less than 25 employees and assets of less than £250,000. Funding through SEIS investors has a cap of £150,000.

With its beneficial tax relief in place, it hopes to support small enterprises who are focused on growth. So far, the SEIS scheme has created over £600 million of investment. Like EIS, SEIS is designed to provide balance to investment portfolios while boosting the growth of early-stage businesses.

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03 | Is SEIS for you?

Typically, the investees using SEIS will be ambitious with sound business plans that are striving to be successful and profitable. The companies will require capital to fund their growth and may not be able to achieve this from traditional funding methods due to the length of time they have been trading for. However, through an SEIS these seed enterprises can offer investors equity in their business so that investments can grow alongside the growth of the business.

It is important to remember that while investments hope to grow, there is also a risk of downside and that the value of the investment can fall.

04 | What tax advantages are available?

Capital Gains Tax

One of the biggest advantages of SEIS is the fact that investors do not have to pay any capital gains tax on any profits that are made through investing in an SEIS business.

If you invest in an SEIS eligible business, then you will not have to pay capital gains tax on the profits you make from that investment.

Capital Gains Relief

There are 2 CGT reliefs within the SEIS:

Reinvestment relief,

Where a gain arising in tax year 2017 to 2018 on a disposal of any asset is reinvested in shares in a company on which you get SEIS Income Tax relief.

Disposal relief,

Where shares in a SEIS company are disposed of after having been held for 3 years and certain criteria are met.

Loss Relief

It may be the case that investments may be sold for less than you originally paid thus, making it a loss however, loss relief is available to mitigate the risk. It works by offsetting any income tax liability at a marginal rate.

Inheritance Tax

As long as you hold an investment in an SEIS-eligible business for more than two years before your death, your SEIS investment would be exempt from Inheritance Tax..

05 | What are the conditions of SEIS?

While SEIS offers significant tax advantages, there are some conditions that need to be met;

The 50% income tax relief is only available on the fi rst £100,000 of investment in SEIS-eligible companies. The maximum tax relief is £50,000.

Investors may only take a 30% stake through SEIS-eligible investments.

To benefi t from the tax incentives, investors must hold the investment for at least three years. To benefi t from the Inheritance Tax exemption, you should keep the investment for more than two years.

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ABOUT CROWDJET

CROWDJETTM LTD HAS BEEN GIVEN HMRC ADVANCED ASSURANCE FOR SEIS & EIS

Opportunity

The opportunity exists to create a new crowdfunding platform experience to enable startups to raise as little as £50,000 to invest into growing and scaling their business operations. We understand how daunting this can be for entrepreneurs who may be fundraising for the first time and so in order to differentiate from the market, we seek to carefully select our startups and talent to then identify and match them with lead investors to participate in their crowdfunding campaign. CROWDJET’S primary focus will be on raises in the range of £50,000 to £5 Million for UK-based companies that either require seed stage or Series A funding.

Solution

Our solution is a FCA regulated cloud based crowdfunding platform that also serves as an incubator to nurture start-ups in their formative years. Our focus is on the B2B consumer experience and how we support the businesses to succeed in the long-term. This additional support will come in the form of free mentoring and guidance as well as the use of our global strategic partnerships in supply chain operations. Our team have expertise across many sectors and are here to help.

Our Services

Allowing investors to easily manage a portfolio of investments in start-ups on our platform.

Fundraising for entrepreneurs Free business support for entrepreneurs

TM

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Risk Warning

Investing in unlisted companies, particularly start-ups and early stage businesses can be rewarding however, it also involves a number of risks. This risk warning is to ensure that you understand the risks involved. This risk disclosure is not exhaustive and does not and cannot highlight all the risks involved. You should conduct a level of your own due diligence and seek third party advice from an appropriately qualifi ed independent fi nancial adviser prior to making any investment in light of your personal circumstances. The information contained herein is not intended as investment advice or an off er to buy or sell any investment. It is intended as a guide to enable you to conduct additional research into the potential risks and rewards of investment in SEIS and EIS businesses. Neither CROWDJET LTD or Marshall Sterling Investment Management take responsibility for any inaccuracies herein or for any decision to invest as such a decision is conducted on an unadvised, execution only basis, which is based on your assertion that you are appropriately experienced to fully understand the risks involved. Furthermore, neither CrowdJet or Marshall Sterling Investment Management take responsibility for any assertions, recommendations, opinions or obligations that any third-parties you may subsequently deal with make. Loss of CapitalAll investment carries a degree of risk. You should be aware that start-ups and early stage business carry a high level of risk and may fail. You should accept the possibility (prior to making any investment) that if this occurs, you will lose all of your investment. You should therefore not invest more money than you can aff ord to lose without having to alter your standard of living.LiquidityStart-ups, early stage and unlisted businesses carry a high risk of illiquidity. This means that you may not be able to sell part of or all of your investment and could be locked into the investment with little or no ability to redeem or liquidate your money. Often investment in illiquid businesses require a management buyout or stock market listing in order to achieve an exit for early stage investors. If a business fails before such an event, you will lose part or all of your investment. You should not invest more money than you can aff ord to lose without having to alter your standard of living.DividendsStart-ups, early stage and later stage businesses may not be in a position to make dividend payments as advertised. Investors may be required to wait several years for a dividend if they receive a payment at all. You should accept prior to investment that this is a possibility, as is the business failing, in which case you will lose all of your investment. You should not invest more money than you can aff ord to lose without having to alter your standard of living.

DilutionInvestments made may be subject to dilution. This means that if the company raises additional equity funding in the future, it will issue new shares to new investors and the percentage of the business you own will decline. Any new shares may also allow for certain preferential rights to dividends, sale proceeds and other matters. If such rights are exercised by new investors this may work to your disadvantage. If the investee company grants options (or similar rights to acquire shares) to connected employees, service providers or certain other parties then your investment may be diluted as a result which will devalue your investment.Diversifi cationGenerally speaking diversifi cation, or the spreading of your investments across a number of diff erent investments is seen as a positive risk management strategy because you are spreading the risk. Investing in start-ups, early stage and unlisted companies should be done as part of a diversifi ed investment portfolio. Not every type of investment will be appropriate for every investor. To spread and therefore disperse risk you should consider investing smaller amounts in multiple businesses. Investing in unlisted companies, particularly start-ups and early stage is a high risk/high reward investment strategy and you should strongly consider only investing a small percentage of your investment capital into this type of investment which is liquid and has a high degree of failure risk. You should conduct your own research or seek guidance form an independent fi nancial adviser prior to making any investment. Please visit our website for a full risk disclosure or the Money Advice Service for more information. This fi nancial promotion has been approved under Section 21 of the Financial Services and Markets Act 2000 by Marshall Sterling Investment Management, which is authorised and regulated by the Financial Conduct Authority FRN: 646917. . CROWDJET LTD is registered in England and Wales under Company No: 11621680 and is an Appointed Representative under FCA Firm Reference Number: 824386 of Marshall Sterling Investment Management FRN: 646917 which is Authorised and Regulated by the Financial Conduct Authority.

CROWDJETTM LTD

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