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Spondoo Accounting

Is it possible for siblings to invest in your startup and qualify for SEIS or EIS relief?

October 25, 2023

When entrepreneurs embark on the journey of launching a startup, funding is a critical factor for success. In many cases, the initial capital comes from family and friends who believe in the business idea. However, not all investors are created equal, especially when it comes to tax incentives such as the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). In this article, we explore whether it’s possible for siblings to invest in a startup and take advantage of SEIS or EIS relief.

Understanding SEIS and EIS

Before delving into the specifics of sibling investments, it’s essential to grasp the basics of SEIS and EIS.

Seed Enterprise Investment Scheme (SEIS): SEIS is a UK government initiative designed to encourage investment in early-stage startups. Investors who back companies eligible for SEIS can benefit from significant tax advantages. This includes income tax relief, capital gains tax relief, and loss relief if the investment doesn’t perform well.

Enterprise Investment Scheme (EIS): EIS, like SEIS, offers tax incentives to investors. However, EIS applies to a broader range of companies and offers more substantial tax relief. Investors can receive income tax relief, capital gains tax deferral, and inheritance tax exemptions.

Investing in Startups: Who Qualifies for SEIS and EIS Relief?

Eligible Family Members:

  • Siblings (brothers and sisters)

Siblings, being close family members, often come to mind as potential investors for a startup. The good news is that siblings are indeed eligible to invest in your startup and qualify for SEIS or EIS relief, just like any other private individual.

  • Aunts and uncles – Your aunts and uncles can indeed invest in your start up and claim EIS & SEIS relief on their investment

Family Members Who Do Not Qualify for SEIS or EIS Relief:

While siblings can avail SEIS and EIS relief, it’s essential to clarify that not all family members are eligible. The following family members cannot claim these tax benefits:

  • Wife
  • Mother
  • Father
  • Grandmother
  • Grandfather

It’s important to note that these close family members can still invest in your startup, but they won’t enjoy the same tax advantages as siblings and other eligible investors.

In summary, siblings can invest in your startup and take advantage of SEIS and EIS relief, provided the business meets the scheme’s criteria. These tax incentives make investing in a startup more attractive and less risky for private individuals. However, it’s crucial to consult with tax professionals and seek advanced assurance to ensure compliance with the intricate regulations of SEIS and EIS. If you’re considering raising capital for your startup, remember that family and friends, including siblings, can play a crucial role in its success.

For support obtaining advanced assurance, structuring your cap table, and even start accounting & bookkeeping services, please get in touch with us today.

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Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.
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