Seed enterprise investment scheme ― withdrawal of relief

By Tolley
OMB_tax_img5

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

  • Seed enterprise investment scheme ― withdrawal of relief
  • Relief withdrawn
  • Receipt of value
  • Repayment or repurchase of share capital of other shareholders
  • Shares cease to be eligible shares
  • Notification

The Seed enterprise investment scheme (SEIS), like the Enterprise investment scheme (EIS), is designed to encourage individuals to invest money in shares issued by qualifying unquoted companies trading wholly or mainly in the UK.

The scheme became effective from 6 April 2012 and HMRC have since published some basic guidance . See the Seed enterprise investment scheme (SEIS) – introduction guidance note for an overview of the scheme.

FA 2012, Sch 6
Relief withdrawn

Income tax relief on SEIS shares may be granted once 70% of the money raised by the share issue has been spent or the company has been trading for four months. The company can then submit a compliance statement to HMRC, who will issue a compliance certificate provided they are satisfied.

In addition to this, it is possible to provisionally claim the CGT re-investment relief without receipt of a compliance certificate.

Because of this, there are extensive provisions for the withdrawal of relief. Withdrawal applies to all forms of relief given through SEIS and must be applied as if the relief had never been given.

SEIS relief is withdrawn if:

  • the shares are sold to someone other than the spouse / civil partner (ITA 2007, ss 257FA–257FB)
  • a call option is granted in respect of the shares (ITA 2007, s 257FC)
  • the investor acquires a put option in respect of the shares (ITA 2007, s 257FD)
  • the investor or his associate receives 'value' from the company, or a person connected with the company (ITA 2007, ss 257FE–257FO)

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