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Important risk information for SEIS and EIS investors
SEIS and EIS investments carry significant risks that every investor must understand before committing capital. These are high-risk investments and are not suitable for everyone. Please read the following risk factors carefully.
SEIS and EIS investments are made into early-stage companies that may fail entirely. You could lose all of the money you invest. These companies often have limited trading history, unproven business models, and may not generate revenue for an extended period. Unlike deposit accounts, your capital is not protected.
Shares in SEIS and EIS qualifying companies cannot easily be sold on a public market. There is no established secondary market for these investments, meaning you may not be able to sell your shares when you want to. You should only invest money that you can afford to have tied up for a significant period.
To retain the tax benefits of SEIS and EIS, you must hold your shares for a minimum of three years. Selling before this period will result in the loss of tax relief already claimed. In practice, most investments are held for significantly longer than three years before any exit opportunity arises.
Early-stage companies frequently raise additional rounds of funding. Each new funding round may issue new shares, which can dilute your percentage ownership in the company. This means your share of any future profits or exit proceeds could be reduced, even if the company performs well.
There is no guarantee that you will receive any return on your investment. Early-stage companies may not pay dividends, and there is no certainty that the company will be acquired or listed on a stock exchange. Past performance of similar investments is not a reliable indicator of future results.
SEIS and EIS tax reliefs are subject to qualifying conditions being met and maintained throughout the relevant period. If the company ceases to meet the qualifying criteria, or if you sell your shares within the minimum holding period, HMRC can withdraw the tax relief. Changes in tax legislation could also affect the reliefs available. Tax treatment depends on individual circumstances and may be subject to change.
Understanding the balance between potential returns and the risks involved.
SEIS and EIS investments are among the highest-risk investments available. The potential for total loss of capital is real, and investors must be prepared for this outcome.
The government offers generous tax incentives to encourage investment in early-stage companies, which can help to offset some of the risks involved.
SEIS and EIS investments should only form a small part of a diversified investment portfolio. They are not suitable for investors who cannot afford to lose their entire investment. We strongly recommend seeking independent financial advice before making any investment decision. Tax treatment depends on individual circumstances and may change in the future.
Have questions about SEIS or EIS risks? Our team can help you understand whether these investments are appropriate for your circumstances.