How Irish startups can find UK investors

AUTHOR: Tobias Møller, Equity Manager

The UK’s SEIS and EIS schemes make investment attractive to VCs and angels in the UK – and Irish companies can take advantage.

Irish companies have grown into iconic brands around the world – but overseas investment isn’t just for the big players. Our nearest neighbour, the UK, is a source of potential investment for startups and early-stage businesses – if you know how to get the approach right.

Early stage investment enjoys generous tax breaks in the UK, which accounts for the country attracting companies from around the world to set up a base there. In seeking UK investment, Irish founders need to know what these incentive schemes are and how they can ensure their businesses qualify for investors to receive the benefits. The most important of these schemes are SEIS and EIS.

What are SEIS and EIS?

SEIS and EIS are two UK government tax incentive schemes designed to encourage investment in early-stage and small and medium-sized enterprises (SMEs).

SEIS (Seed Enterprise Investment Scheme) is designed to help startups raise funds by providing tax relief to investors. Under the scheme, investors can receive up to 50% income tax relief on the amount they invest, up to a maximum of £250,000. In addition, there are capital gains tax exemptions and loss relief available.

EIS (Enterprise Investment Scheme) is aimed at helping SMEs raise funds, again by providing tax relief to investors. Under this scheme, investors can receive up to 30% income tax relief on the amount they invest, up to a maximum of £5 million per tax year. As with SEIS, there are also capital gains tax exemptions and loss relief available.

	SEIS	EIS
Amount startups can raise	£250,000	£12,000,000 in lifetime of business £5,000,000 in any given tax year
Max years since first commercial sale	3 years	7 years
Tax break for investors	50% No capital gains tax on earnings No inheritance tax on earnings	30% No capital gains tax on earnings No inheritance tax on earnings

Both SEIS and EIS are designed to provide startups and SMEs with access to the investment they need to grow and develop, while also providing tax benefits to investors who are willing to take a risk on these early-stage businesses.

How Irish companies can qualify for SEIS and EIS

Startups and SMEs from any country can be funded under SEIS and EIS – and Ireland is no exception.

In order to qualify, a company doesn’t have to be incorporated in the UK, but it needs to establish a permanent presence there by having a fixed place of business or a UK-based agent authorised to enter into contracts on its behalf. The company must maintain its UK establishment for at least three years.

To pass the fixed place of business test, the UK location must be where an essential or significant part of the business is carried out. Activities carried out in the UK can’t be auxiliary or preparatory, but HMRC doesn’t provide a specific definition for these terms, so they review applications on a case-by-case basis.

For Irish holding companies, the parent company must have a UK-based permanent establishment to qualify for SEIS and EIS, and investment must be taken into the parent company; however, if the Irish company has a UK holding company, the administrative and management functions of the company are sufficient to qualify, and the business of trading subsidiaries doesn’t need to be carried out in the UK. An Irish company can also qualify for SEIS and EIS by having a UK-based agent authorised to enter into contracts on its behalf. The agent must have entered into binding contracts affecting the company that relate to the substantive business of the company, and not activities that are auxiliary or preparatory in nature. Please contact equity@swoopfunding.com if you have more questions on this.

Access to a much bigger pool of investors

Qualifying under the rules of SEIS and EIS means that your business will have access to a much wider range of investors in the UK. SEIS and EIS have been so successful that many funds have been created to invest solely under these tax schemes. Swoop has cultivated a network of over 250 investors, of which many invest under these tax schemes. Swoop has helped several Irish businesses access this pool of investors and as an Anglo-Irish company, have been through exactly the same journey.

By signing up to Swoop and providing a pitch deck, our team of Equity Funding Managers can support an application for Branch Setup and SEIS/EIS Advance Assurance and then manage your next raise and give you the best chance of securing investment.

Getting started is easy – click here.