Can investors based outside the UK benefit from EIS or SEIS tax relief?
This is a complex question with two parts.
In respect of the investors – only UK tax resident investors are eligible to claim EIS or SEIS income tax relief. If your non-UK investors do not suffer any UK income tax, then no relief is available. This may solve the problem in the first instance – no UK income tax, no SEIS or EIS tax relief is available.
In respect of the company or companies – the funds can be used by an overseas subsidiary, providing that the issuing company meets the UK permanent establishment requirement and that the overseas company is a 90% subsidiary thereof and performing a qualifying business activity. The same income tax relief is available to the investors using the off-shore or the on-shore company providing that the issuing company or group, its trade and the shares to be issued all meet the requirements for EIS or SEIS relief. The main issue here seems to be whether the UK permanent establishment condition has been met.
A UK holding company of a trading group can meet the UK permanent establishment condition even if the trade is carried out oversees, provided the UK holding company carries out the necessary functions of a parent company from a fixed place of business within the UK (eg. the group’s head office functions are in the UK).
Both SEIS and EIS are complex schemes – too complex for this platform – which become even more complicated when offshore structures are involved. This does not mean that income tax relief is not available, only that additional conditions need to be met. This is a specialist area so do speak with your accountant about this.
