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SEIS and rollover relief made permanent

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20th Mar 2014
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Chancellor George Osborne announced a Budget for investment yesterday, so a lot of attention went into the tax treatment for early-stage investments in start-ups.

The Seed Enterprise Investment Scheme (SEIS), introduced as a temporary measure two years ago, and the capital gains tax 50% reinvestment relief have now been put on a permanent basis.

The indefinite extension of SEIS will allow growth of structured schemes giving investors access to such investments with a spread of risk over a basket of companies.

Investors gain income tax relief of 50% on a maximum investment of £100,000 and also benefit from 50% capital gains tax relief on any reinvestment of assets [TIIN] in an SEIS qualifying company.

The tax reliefs combined limit the exposure of higher rate taxpayers to 22.5% of their investments.

Patrick King of MHA MacIntyre Hudson said: “A maximum investment of up to £100,000 per individual per annum, means the SEIS could become a real attraction to smaller investors particular if they can access a range of companies through structured products.

“This can only be good news for smaller businesses looking for non bank finance,” he said.

John Cridland from the CBI added: “The government has heeded our call to make the SEIS permanent to boost the range of financing options available to growing businesses and spur greater use of equity finance in small firms.”

However Yvette Nunn, president of the ATT, said they remain concerned that the legislation for both EIS and SEIS was too complex.

“We need to ask whether a genuinely simpler scheme for really modest levels of investment (perhaps with a capped level of capital gains tax exemption) would achieve more in encouraging individuals to invest in small companies,” Nunn said.

According to the Treasury the SEIS tax relief resulted in £82m of investment in more than 1,100 companies in its first 18 months.

For the 2012/13 tax year, associated CGT reinvestment relief stood at 100%. Investors can still benefit from that 100% relief if they invest in an SEIS qualifying company before 5 April.

According to the Budget document the government will also explore options for the tax reliefs to apply where individuals make investments in the form of convertible loans, and to better target high-risk investment will change the eligibility criteria of venture capital schemes to avoid subsidising low-risk activities that already benefit from certain government programmes.

It also confirmed the introduction of measures to promote investment in social enterprises, which have often struggled to raise finance.

The 30% income tax relief that is extended to investors in EISs and VCTs will be extended to eligible social enterprises, who can receive a maximum of £290,000 investment over three years.

Capital gains tax

As announced in the Autumn Statement the government will introduce CGT on future gains made by non-residents disposing of UK residential property from April 2015. A consultation on how best to introduce the charge will be published shortly.

The government will legislate to reduce the final period exemption from 36 months to 18 months in most cases from 6 April 2014.

The government will also include payment entitlements under the new agricultural subsidy Basic Payment Scheme [TIIN] within the business asset roll-over relief classes of qualifying assets.

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