Can employees and directors qualify for SEIS tax relief?

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    Jonathan Lea

    We had the following query from a client:

    “one of my new employees / to be director is going to invest – we understand from our reading that employees cannot but directors can under SEIS rules .. we’d just like to get some formal clarification of what we can and cannot do to be squeaky clean”

    Jonathan Lea

    Our answer was as follows:

    1) It is normally a director of a company who is entitled to SEIS relief.

    2) SEIS is not available to employees of the company (or a qualifying subsidiary of the company) unless they are also a director of the company.

    3) It must be noted that an individual (including a director) cannot hold a stake in the company exceeding 30%. This includes issued share capital, ordinary share capital and voting rights. This also extends to “associates” shareholdings, this includes any family members (brothers, sisters, aunts and uncles are not included in this) and other business partners. This can limit the availability of SEIS if the majority of shares are largely held by family members. Therefore, you should be careful to ensure that if a director intended to hold 30% or less of shares in the company that shares are not issued to associates so that it exceeds that 30% limit.

    So to answer your question, yes your employee can be entitled to SEIS but he/she must also be a director. Also the shares which are issued to him/her must not exceed the 30% limit and you must take care in assessing if shares will be issued to any associates of theirs, as per point 3 above.

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