Seed Enterprise Investment Scheme (SEIS) is designed to help certain small, high-risk, unquoted trading companies raise capital by providing income tax and capital gains tax (CGT) reliefs to investors who purchase shares in those companies.
There are two separate reliefs within SEIS; firstly, an income tax relief on the investment with a CGT exemption on gains made when the shares are disposed of and secondly, CGT reinvestment relief. An individual can take advantage of either or both of these reliefs.
Income tax relief
- Investors may be given income tax relief at 50% on their investment of up to £100,000 a year;
- However, income tax relief is withdrawn if the shares are disposed of within three years.
- Gains on the disposal of SEIS shares are exempt unless the income tax relief is withdrawn;
- The CGT exemption may be restricted if an investor does not receive full income tax relief on the subscription for SEIS shares;
- Losses on the disposal of SEIS shares are allowable. The amount of the capital loss is restricted by the amount of the SEIS income tax relief still attributable to the shares disposed of;
- A capital loss arising on the disposal of SEIS shares can be set against income.
- Gains arising on disposals of any assets can be reinvested on subscriptions for shares in any SEIS company;
- SEIS shares have to have income tax relief attributable to them in order to qualify for reinvestment;
- Reinvestment relief enables an individual that has disposed of an asset – that would give rise to a chargeable gain – to treat a maximum of 50% of the gain as exempt from CGT, where they have reinvested all or part of the amount of the gain in qualifying SEIS shares.
You have to meet a number of conditions, both in relation to the company invested in and the individual investing. These largely follow the rules for the Enterprise Investment Scheme (EIS). Please get in touch for detailed information on this scheme.
Please note that this Tax facts page is for general information purposes only. You should seek professional advice before you take any action, or refrain from as a result of information contained herein. Content last updated: 29/6/18.
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