Small Talk: Why the seed enterprise scheme fell on stony ground for the Treasury

Sometimes, you can't even give your money away. That must be the feeling among those ministers who have had a hand in the Seed Enterprise Investment Scheme.

The SEIS is an initiative designed to get much-needed funding into start-up businesses that has so far failed to take off despite offering hugely generous tax reliefs. In fact, for some investors, the scheme is entirely risk-free thanks to the giveaways on offer from the Treasury. Yet the take-up rate is disappointingly low.

So much so that the Department for Business has felt compelled to intervene to try to improve awareness of the scheme. In September, Lord Young, its enterprise tsar, asked the former Dragons' Den panellist Doug Richard to help promote the SEIS. He's since held a series of roadshows to highlight its attractions, including a bash at the London Stock Exchange earlier this month that was co-hosted by Business and Enterprise Minister Michael Fallon.

You certainly can't fault the generosity of the scheme. Invest in a SEIS-eligible start-up and you'll immediately qualify for upfront tax relief of 50 per cent. Hand over £1,000, in other words, and you can claim £500 of it back via your tax return.

In addition, as long as you hold on to your investment for at least three years, there is no tax to pay on any profits you make when you do sell up. If the investment is loss making, you can claim loss relief at 20 per cent, assuming you're a higher rate taxpayer (or 22.5 per cent if you're on the very top rate). That's effectively worth another £200 back of your original investment: so, thanks to tax breaks, you can afford to see your £1,000 SEIS investment fall in value to £300 before you're losing any real money.

Even better, in the 2012-13 tax year, if you have profits from another investment on which capital gains tax is due, the bill will be written off if you invest them in a SEIS-eligible firm. The CGT rate is 28 per cent, so that's another £280 of tax relief on a £1,000 investment. For some investors, then, just £20 of that starting stake would be at risk (or none at all for taxpayers on the absolute top rate of tax, 45 per cent, who get that 22.5 per cent loss relief).

So why isn't the SEIS more popular? Well, one reason, say some business angel groups is that the maximum investment of £150,000 is too low for investors and businesses raising money. Another reason may be that the minimum investments are generally too high, ruling out all but high-net-worth investors, though crowd funding sites such as Seedrs, which allow investors to build portfolios of small stakes in such businesses, may help with that.

Seedrs, not surprisingly, is now pushing the SEIS hard. It is self-interest, of course, but someone has to sell this. For despite the efforts of Lord Young, the biggest problem for the SEIS is so few people know about it. A scheme offering tax reliefs that offers investors an almost risk-free punt on start-ups (or totally risk-free for 45 per cent taxpayers this year) appears to have passed most investors by.

Why has the Treasury been so coy about its largesse? One reason may be nervousness about being seen to shout about what might be described as a tax-avoidance scheme. The less cynical explanation is simply that the Treasury has never done much to promote the tax incentives it offers and doesn't know how to do so.

Either way, it's a crying shame so few people know about the SEIS. It doesn't suit every investor but far greater numbers should be taking an interest.

Rise in standards could help LiDCO

LiDCO Group, the specialist medical device business, could be on the verge of a major success with one of its devices. The National Institute for Health and Clinical Excellence (Nice) has just announced higher standards of monitoring for patients who undergo general anaesthetics and are judged to be at risk.

Its recommendations include using a device incorporated in LiDCO's monitoring products.

House broker FinnCap, which has a target price of 23p for the stock – the company currently trades at 13.5p – says much depends on how quickly Nice's proposals are implemented. But it said the recommendation can only increase the uptake of LiDCO's monitor.

Small firms are urging Osborne to focus on them

A further overhaul of the banking sector, new reliefs on national insurance contributions and tax simplification should be the Chancellor's Autumn Statement priorities, the Federation of Small Business will say today.

The federation will call on George Osborne to put "small businesses at the heart of reforms" when he makes his statement in 10 days' time.

John Walker, chairman of the federation, said the Government had yet to deliver the competition necessary in the banking sector for SMEs' access to finance to improve. He will urge Mr Osborne to launch a Small Business Bank to promote and protect SMEs.

Small Businessman of the Week: Nick Moore, managing director, We Trade It

We describe ourselves as an online business-to-business community: we provide a forum where start-ups and SMEs (small and medium-sized enterprises) can trade with each other, but also just connect and share experiences. All of the people involved in launching our site have run their own businesses before, so we know how tough it can be for start-ups to find support.

"Any business on the site can buy and sell products by trading with other businesses on the site, but it's effectively a bartering system – the businesses trade with each other using points rather than cash. We allow members to cash in their points at any time they want, because we know cash is king, but trading in this way allows a small business to conserve its cashflow, which can be really crucial for a start-up. We're also giving them an online shop window – that's vital since these companies just don't have the budget for the sort of e-commerce operations that big businesses routinely use.

"We launched this site in September and we're really pleased with how it's going so far – we've got 720 members from a very wide variety of business sectors already and next year we plan to really ramp up our activities."

PROMOTED VIDEO
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmReview: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Travel
travel
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
filmBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
Arts and Entertainment
Preparations begin for Edinburgh Festival 2014
Edinburgh festivalAll the best shows to see at Edinburgh this year
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Arts and Entertainment
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Financial Analyst - Forecasting - Yorkshire

£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

Business Architect - Bristol - £500 per day

£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices