ACCA Advanced Taxation (ATX) Practice Exam

Which type of investment is primarily supported by the SEIS?

1. Large corporations

2. High-risk investment funds

3. Small, early-stage companies

4. Real estate investments

The correct answer is: Small, early-stage companies

The Seed Enterprise Investment Scheme (SEIS) is specifically designed to assist small, early-stage companies in their growth and development by providing tax relief to investors. This initiative aims to stimulate investment in new startups that often struggle to secure funding through traditional routes due to their higher risk profile and lack of established track records. By offering significant tax advantages, such as income tax relief and capital gains tax exemptions, SEIS incentivizes investors to put their money into small companies. These companies are typically not only innovative but also have the potential for significant growth, which is crucial for driving economic development and job creation. The focus on early-stage companies directly aligns with the objectives of SEIS, making this type of investment the primary target of the scheme. In contrast, large corporations do not receive support from SEIS as they usually have better access to traditional financing options. High-risk investment funds may encompass a broader range of investments, but SEIS is specifically targeted at individual small companies rather than funds that may invest across various asset classes. Similarly, real estate investments are not the main emphasis of SEIS; the scheme is focused on encouraging investment in small business ventures rather than the property market. Thus, the correct answer reflects the core purpose of SEIS in fostering the growth