Seed Enterprise Investment Scheme (SEIS)
This scheme is similar to the EIS scheme but encourages investment into smaller start-up companies.
On condition that:
- SUBSCRIBE for new SHARES in a QUALIFYING SEIS COMPANY.
- NOT be an EMPLOYEE (BUT CAN be a DIRECTOR)
- own LESS than 30% of the shares.
Then INCOME TAX and CAPITAL GAINS TAX reliefs apply.
INCOME TAX RELIEF (SEIS)
INCOME TAX RELIEF = AMOUNT SUBSCRIBED FOR x 50%
THE RELIEF is in the form of a TAX REDUCTION to the INCOME TAX LIABILITY.
The MAXIMUM ANNUAL SEIS investment is £100,000.
The MAXIMUM ANNUAL tax reducer is therefore £50,000.
The INCOME TAX RELIEF is WITHDRAWN if the individual does not hold the shares for a mininum of 3 years.
CAPITAL GAINS TAX RELIEF
If EIS qualifying shares are held for 3 YEARS then CAPITAL GAINS are EXEMPT.
CAPITAL LOSSES can be relieved against TOTAL INCOME in a similar manner to TRADING LOSSES.
SEIS Reinvestment Relief
This is another way of encouraging investment into SEIS qualifying shares.
If an individual has CAPITAL GAINS that would otherwise give rise to CAPITAL GAINS TAX, the individual can REINVEST the proceeds in qualifying SEIS shares and SOME of the CAPITAL GAIN will be EXEMPT (NOT simply DEFERRED as with EIS REINVESTMENT RELIEF).
The individual must also qualify for SEIS INCOME TAX relief in the SAME TAX YEAR.
The MAXIMUM SEIS EXEMPTION is 50% of the LOWER of:
- The GAIN
- The AMOUNT INVESTED in EIS shares.
Since the MAXIMUM annual SEIS INCOME TAX RELIEF is £100,000, the MAXIMUM CAPITAL GAIN that can be EXEMPTED each year is £50,000.