Seed enterprise investment scheme ― tax relief

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Seed enterprise investment scheme ― tax relief
  • Scheme benefits
  • Income tax relief
  • Dividends
  • Allowable capital losses and tax-free capital gains
  • Re-investment relief

The SEIS, like the EIS, is designed to encourage individuals to invest money in shares issued by qualifying unquoted companies, though is specifically aimed at smaller companies which have only recently begun to carry on a qualifying trade.

The scheme became effective from 6 April 2012 and HMRC have since published some basic guidance .

FA 2012, Sch 6

See the Seed enterprise investment scheme (SEIS) ― introduction guidance note for an overview of the scheme.

Scheme benefits

A subscription for eligible shares of a qualifying EIS company is a tax efficient investment for the individual. He can benefit from the following tax reliefs:

  • income tax relief for the investor of up to 50% of the amount invested, up to an annual subscription limit of £100,000
  • gains on disposals of SEIS shares after three years may be exempt from CGT
  • CGT exemption allows investors disposing of any asset from 2013/14 onwards an exemption up to 50% of their subscriptions in SEIS shares during the same tax year (100% in 2012/13)
  • losses on disposals of SEIS are allowable for CGT purposes
  • SEIS investments should qualify for IHT BPR after two years of ownership (see the Business property relief (BPR) guidance note)
Income tax relief

The income tax relief works in much the same way as the income tax relief for EIS and VCTs. That is, the income tax relief is 50% on the lower of:

  • the amount subscribed for the shares
  • the annual limit of £100,000
Operation of the relief

Relief is given as a reduction from the

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