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Phew what a relief!

11th Nov 2013
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We had our first call about the Seed Enterprise Investment Scheme (SEIS) yesterday.  SEIS is a really quite generous follow-on to the Enterprise Investment Scheme (EIS) which was introduced in April 2012.  Its aim is to encourage seed investment in early stage companies.

Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 AND  Capital Gains Tax (CGT) exemption for any gains on the SEIS shares.

The maximum amount that can be raised for each company is £150,000 and the company cannot have more than 25 employees or assets over £200,000.  And the SEIS benefits for investors?  Well, investors can receive initial income tax relief of 50% on investments up to £100,000 per tax year in qualifying shares issued on or after 6 April 2012.

There are two Capital Gains Tax reliefs within the SEIS:

Reinvestment relief:  where a gain arising in 2012–13 on a disposal of any asset is reinvested in shares in a company on which you obtain SEIS Income Tax relief

Disposal relief: where shares in a SEIS company are disposed of after having been held for three years and certain criteria are met.

This is just the basics – the full how’s your father can be found on Help Sheet 393  http://www.hmrc.gov.uk/helpsheets/hs393.pdf

The return has acquired a new box on the CG pages – box 5 for the relevant claim amount for the tax relief.  The CG relief should be deducted from the relevant gain before arriving at the chargeable figure to be entered on the return; it is not entered as an adjustment in terms of tax in box 8. 

Are many taking advantage of this scheme out there in the real world?

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By NStJL
11th Nov 2013 22:45

SEIS

I have issued shares in two start-ups under SEIS.  While the limit of total inward investment is low, you can follow on with EIS after the initial SEIS funding is 70% spent.  It is also worth putting subscriber shares in for SEIS, as the CGT free gains on on exit will apply, even if the 50% tax relief on a few hundred quid of share capital might not amount to much.  Finally, to get the tax free gains on exit, the initial tax relief on entry must be claimed in order to "register" the shares as SEIS qualifying with HMRC.  The initial SEIS application is not sufficient on its own.

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