Seed Enterprise Investment Scheme (SEIS)

The SEIS – Seed Enterprise Investment Scheme was introduced in 2012. It is designed to boost economic growth in the UK by encouraging investment in small and start-up businesses whilst offering tax-efficient benefits to individuals who invest.

Tax Benefits of SEIS

SEIS relief applies only to individuals over 18 years of age and not, for example, companies or trusts. Investors do not need to be resident or ordinarily resident in the UK for tax purposes when the shares are issued but will need to be liable for UK income tax.

Eligible individuals investing in new shares that do not amount to more than a 30% holding in the company can secure the following tax benefits:

50% income tax relief on the amount invested provided that the shares are held for a minimum of three years. The maximum amount on which investors may obtain income tax relief in any tax year is £100,000.

Capital Gains Tax (CGT) Reinvestment Relief, providing potential exemption of 50% of an existing CGT bill should the monies be reinvested into another SEIS qualifying company.

CGT Exemption on capital gains realised on the disposal of an SEIS investment, provided that the shares have been held for at least three years.

Loss Relief so that the capital loss on an investment can be set against capital gains of that tax year or a later tax year, or against income of that tax year or the preceding tax year.

Inheritance Tax (IHT) exemption providing the shares have been held for at least two years from the date of issue and are held at the time of death.

Investors in the SEIS can now carry relief back to the prior tax year up to their full annual entitlement.

Further information on the above reliefs and a summary of the main conditions to be satisfied in order to secure the reliefs is provided below. Reference is also made to further income tax relief which can often be secured in cases where the investor suffers a loss.

 

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