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Tax (Reporting & Relief)

  • Updated

EIS and SEIS

The Enterprise Investment Scheme and Seed Enterprise Investment Scheme are government schemes which incentivise investment into U.K. companies via tax relief. Claims can either be submitted for the current tax year, or backdated into a previous tax year.

If the Syndicate Lead has specified their deal into your company as being eligible for EIS, SEIS, or both, and your company has provided Odin with Advanced Assurance of this during the deal review process, the syndicate investors will be able to claim relief via the relevant scheme after the deal has closed on Odin.

Ordinarily, S/EIS relief is the responsibility of your company. Odin can generate the EIS3 certificates for the syndicate investors and distribute them correctly, but this will carry an additional cost of £1,000 to whichever party is paying Odin’s fee.

If you are making use of Odin’s rolling close facility, please note that the Syndicate Lead won’t be able to access the information needed for S/EIS submissions until the deal has fully closed on Odin.

We’ve outlined the process for EIS and SEIS relief below:

  • As soon as the deal has fully closed on Odin, your Syndicate Lead will be able to download an investor list via their deal admin dashboard. They’ll then share this with you in the relevant format. The investor list has been designed specifically for S/EIS submissions, in that it includes all information required for S/EIS1 form submission. If the Syndicate Lead shares the full, unredacted list with you:
    • Only your investors who have invested as individuals (not through business entities) in Column N and have provided a resident address in ‘GB’ (Columns H-L) will be eligible for either form of relief. If any investors don’t comply, you’ll have to delete those rows in the sheet.
    • The final column of the sheet shows how much of each investor’s final investment amount is eligible for S/EIS relief. If your investors committed and transferred in exact multiples of the share price, this should be the same figure as their final investment amount (Column F). If they didn’t it’s likely there’ll be a small delta, as Odin has to round those shares down to the nearest whole number. Any application that isn’t for whole shares will likely be rejected so it’s important to double-check these figures.
  • Your company will then need to complete the S/EIS1 form and submit it to HMRC. This form provides HMRC with details about the company, the investment round, and the investors participating in the scheme.
    • Your company will also, as part of this submission, share your Articles of Association, the investment agreement, and any other relevant paperwork specified by HMRC.
  • Your company will then have to wait for HMRC to review and approve your application. If everything is in order, they will issue your company with an S/EIS compliance certificate, known as the S/EIS2 UIR.
  • Once this has been received, the next step is to provide each eligible investor with an S/EIS3 certificate, which provides the details they need for their tax return.
    • The default option here is for your company to complete the form for each investor in order to obtain their S/EIS3 certificates. You would then have to distribute these certificates once all have been received, and provide the investors with the necessary information about how to claim relief on their next tax return (or how to backdate their claim, if applicable).
    • Odin can also generate and distribute S/EIS3 certificates, provided the relevant £1,000 fee has been paid by the party paying Odin’s platform fees.
      • Once Odin has completed all S/EIS3 certificates according to the correct investor information, our team will then issue the certificates to your investors via mail merge.
      • Once the certificates have been distributed, Odin will securely store them internally and our Deal Operations team will email you to confirm that the process has been completed.

Please also remember to keep accurate records of the S/EIS application process, in case of any future audits. This includes copies of all forms, certificates and correspondence with HMRC. Odin will also keep records of S/EIS3 certificates if it generated and distributed them.

If your syndicate investors have questions, please refer them to the Syndicate Lead, or alternatively to Odin’s Syndicate Investor guide where we elaborate on the process from their perspective. The following two points are the most common queries we see:

  • Where is my S/EIS certificate?
    • Odin is dependent on how soon your company can obtain the S/EIS UIR in order for the S/EIS3 certificates to be generated.
    • If Odin is handling the S/EIS3 certificates we will do so as quickly as possible. However, we have no control over how quickly your company obtains and distributes these, and would advise the investor defers to their Syndicate Lead.
  • The tax year is approaching and I’m worried I can’t submit my claim in time.
    • Odin is dependent on how soon your company can obtain the S/EIS UIR in order for the S/EIS3 certificates to be generated.
    • If Odin is handling the S/EIS3 certificates we will do so as quickly as possible. However, we have no control over how quickly your company obtains and distributes these, and would advise the investor defers to their Syndicate Lead.
    • If it’s unlikely that the certificates will be generated and distributed to investors before the tax year end deadline, the Syndicate Lead will advise their investors that their relief claim can be backdated into a previous tax year.

 

U.S. Investor Reporting (PFIC/FATCA)

All Odin nominee entities are considered Passive Foreign Investment Companies (PFICs) under the Foreign Account Tax Compliance Act (FATCA). FATCA requires Foreign Financial Institutions to report information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest, directly to the Internal Revenue Service (IRS).

Odin’s U.S. advisors, Bennett Thrasher, assist us with additional documentation so that there are no tax implications for U.S. investors. As such, Odin can accept funds from U.S. investors without issues. Please note, however, that Odin does not provide tax advice, and if you or your syndicate investors have any concerns we’d recommend speaking to qualified accountants and enquiring independently about PFIC taxation.

U.S. investors are either investors who have provided Odin with a registered address in the U.S. during their account setup, investors who have completed their KYC with a U.S. passport, or investors who have otherwise informed Odin of their U.S. nationality and/or taxpayer status.

Odin does not handle blue-sky filings. If you require this our advice is to seek a provider. Odin also does not deal with K-1 forms, as they aren’t applicable to PFICs.

Odin’s process for ensuring tax compliance for U.S. investors is as follows:

  • Once per year, in the run-up to the end of March, Odin provides PFIC documentation to U.S. investors, so that they may make a Qualified Electing Fund (QEF) special election and report annual earnings under the QEF regime (instead of being subject to the Excess Distribution Regime, which incurs additional taxation). This ensures no additional tax liability on their investments held via Odin vehicles.
  • U.S. investors have additional reporting requirements regarding their investment in a PFIC. We advise U.S. investors to file Form 8621.
    • Additionally, if the value of your investor’s investments is greater than $50k, (or greater than $100k if they are married and file jointly with their spouse), they will also have to submit Form 8938. You can find more guidance here.
    • Those investors required to file Form 8938 must do so annually as part of their personal tax returns. Since the PFIC has no income in Odin's case (no dividends are paid), investors may choose only to file form 8621 once an exit event occurs, in order to make a QEF election on the capital gain. However, we advise investors to take independent tax advice on this matter.
  • Odin provides the information needed for all of these filings, but don’t handle the filings for the user. They need to fill out the forms themselves with the data we provide.
  • Odin does not charge your U.S. investors for any of this, but please note that Odin charges per U.S. investor involved in an SPV.

 

Tax reporting in other domiciles

Because Odin uses a United Kingdom Bare Trust structure to administer investments, there is complete tax transparency. This means that in practice, there are no geographic restrictions around where investors can invest from, or the companies they can invest into.

Because of this tax transparency, any of your investors, as beneficial owners of the shares, would pay tax wherever they were tax resident upon a liquidity event. Investors do not have tax liability in the U.K.

Odin does not provide tax advice in any geography, and if you or your investors have any questions we’d recommend seeking independent advice and/or speaking to qualified accountants.

The same applies to any other government-sponsored tax relief scheme operated in the investor’s home country. If they need to process a claim for tax relief based on these schemes, Odin’s advice is to seek advice from a qualified accountant in the country they’re claiming the relief in.

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