In short: maybe. Not all family members are eligible to claim SEIS or EIS tax relief. During a "friends and family" funding round, certain relatives can invest and benefit from these schemes, while others cannot, based on HMRC rules.
Who CAN invest and claim SEIS/EIS relief?
The following relatives can invest and claim relief, as long as they do not have a 'substantial interest' in the company (see definition below) and as long as "neither the investor nor any associates may be employees of the company or any qualifying subsidiary (see VCM34140) in period B (see VCM31140) unless they are also a director" see VCM32020
-
The founder themselves - yes really! You need to be a director and can't own 30% (with associates) but...
-
Siblings (brothers and sisters)
-
Uncles and aunts
-
Cousins
-
In-laws (e.g. brother-in-law, mother-in-law)
-
Step-parents
-
Friends and other non-immediate relatives
Substantial interest
You’re considered to have a substantial interest in a company if you and your associates (see VCM32030):
-
Hold more than 30% of the company’s shares
-
Control more than 30% of the voting rights
-
Are entitled to more than 30% of the company’s assets in the event of winding up
This rule applies to all investors - family or not.
Note: There are exceptions when only subscriber shares have been issued, but seek professional advice in those cases.
Who CANNOT claim SEIS/EIS relief?
These close family members cannot claim SEIS/EIS relief (even if they invest), due to HMRC restrictions (see vcm11100):
-
Spouses or civil partners
-
Parents and grandparents
-
Children and grandchildren
Note: While these individuals won’t be eligible for SEIS/EIS tax benefits, they can still invest.
FAQ
- What if I make my parent/child etc. a director in the business? I know directors can make use of SEIS
No - Their shares are aggregated due to the 'associate' rule so they cannot use SEIS even if they are a director.
- Can my family member transfer the funds from their business account?
No - funds should be sent from their personal account. See the VCM guidance; "For income tax relief the general rule, in ITA07/S257AA, is that to be eligible for the relief an individual must subscribe for shares on his or her own behalf."
