Introduction
You’ve poured your heart, sweat and equity into your startup. Under the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), you’ve unlocked vital tax breaks. But have you thought about SEIS equity protection when you’re not around? Estate planning for founders isn’t just about drafting a will. It’s about ensuring your shares—and your legacy—stay intact. Let’s explore how you can bunker down your SEIS/EIS equity stakes, dodge inheritance tax surprises and sleep easier at night.
What Are SEIS and EIS—and Why Estate Planning Matters
SEIS and EIS are government-backed schemes to fuel UK innovation. They reward investors (and founders!) with:
- Income tax relief (up to 50% under SEIS, 30% under EIS)
- Capital Gains Tax deferral
- Loss relief if things go south
But here’s the catch: your SEIS/EIS shares still sit inside your personal estate. On death, these shares could face up to 40% Inheritance Tax. That’s where SEIS equity protection comes in.
Think of your shares like prized records. If you don’t lock them in a fire-proof safe, they could burn—or be grabbed by the taxman.
Key Risks to SEIS Equity Protection
Ownership Gaps
• No will = no guidance on who inherits your SEIS/EIS shares.
• Joint accounts can muddy the waters.Disputed Shares
• Family feuds over value.
• Beneficiaries unaware of the tax benefits.Inheritance Tax (IHT) Hit
• Up to 40% IHT if Business Property Relief (BPR) isn’t applied.
• Timing matters—shares need minimum two-year holding.Lack of Liquidity
• Estate can’t sell shares quickly.
• Forced discount sales at rock-bottom prices.
Each of these can gut SEIS equity protection without the right planning.
Estate Planning Tools to Safeguard SEIS Equity Protection
Wills and Trusts
- Simple Will: Specifies who gets what.
- Discretionary Trust: Keeps shares out of your estate for IHT, offering full SEIS equity protection.
- Life Interest Trust: Beneficiaries enjoy dividends while assets remain outside the estate.
Shareholder Agreements
- Include buy-sell clauses triggered on death.
- Define valuation methods to avoid squabbles.
Business Property Relief (BPR)
- Qualifying shares get 100% relief from IHT after two years.
- Constantly review eligibility (no more than 50% of trading activities).
Life Insurance in Trust
- Funds to cover IHT bill.
- Keeps your SEIS/EIS shares intact—essential for SEIS equity protection.
Practical Steps for Founders
Draft or Update Your Will
– Spell out exactly who inherits your SEIS/EIS shares.
– Mention BPR and eligibility.Set Up a Trust
– Discretionary trusts offer flexible SEIS equity protection.
– Appoint a reliable trustee (or firm).Embed Exit Clauses
– Ensure your Shareholder Agreement has clear triggers.
– Pre-empt family disputes.Leverage BPR
– Hold shares at least two years.
– Keep trading thresholds under 50% for full relief.Arrange Life Cover in Trust
– Match the IHT liability.
– Funds go directly to beneficiaries or trustees.Keep Detailed Records
– Original SEIS/EIS compliance documents.
– HMRC approvals and share certificates.Review Annually
– Business evolves—so should your plan.
– Revisit trust deeds and BPR status.
Imagine Sarah, a biotech founder. She set up a discretionary trust in year one, holds her shares beyond two years, and pairs them with life insurance. When she unexpectedly passed, her children received the business without an IHT bill. SEIS equity protection? Check.
How Oriel IPO Simplifies SEIS Equity Protection
Juggling growth and paperwork is hard. That’s where Oriel IPO steps in:
- Commission-free investment marketplace.
- Curated, SEIS/EIS-eligible opportunities.
- Educational resources on BPR, trusts and IHT.
- Subscription-based access to exclusive tools.
With Oriel IPO, you can track your equity, access compliance docs and stay on top of eligibility rules. No more scattered folders. No more last-minute panics.
Common Pitfalls and How to Avoid Them
No Will, No Plan
“It won’t happen to me” is a dangerous thought.
Fix: Draft a will with an expert.DIY Trusts Gone Wrong
Misworded clauses can invalidate relief.
Fix: Use a qualified solicitor.Overlooking Trading Tests
Non-qualifying activities can revoke BPR.
Fix: Annual compliance checks.Failing to Update Documents
M&A, new funding rounds, board changes.
Fix: Quarterly reviews.
Each misstep chips away at your SEIS equity protection. Don’t let red tape be the reason your family misses out.
Conclusion: Taking Control Now
You’ve built something extraordinary. Your SEIS/EIS equity is more than numbers—it’s your legacy. Estate planning isn’t a chore; it’s the final pivot that secures everything you’ve created. Use wills, trusts, BPR and life insurance to shield your shares. Stay organised. Review regularly. And lean on platforms like Oriel IPO for seamless document management and expert guidance.
Your startup’s future. Your family’s security. Your peace of mind. Don’t wait.
