What tax relief is available to investors?

There are five tax reliefs available to investors in companies qualifying under SEIS or EIS. The basic rules are as follows:

1. Income Tax Relief

  • 50% of the amount invested under SEIS can be offset against personal income tax liability. Under EIS this is 30%
  • Possible to carry back all or part of the investment to the preceding tax year
  • Shares must be held for at least 3 years
  • No minimum amount of investment
  • Maximum qualifying investments of £100,00 under SEIS in any tax year – i.e. maximum tax relief of £50,000. Under EIS the maximum investment is £1m 
  • Shares must be fully paid for when issued and be full-risk ordinary shares

2. Capital Gains Tax (CGT) Exemption

  • Any gains on the sale of the shares are exempt from CGT
  • Shares must be held for at least 3 years to obtain full relief
  • Income tax relief must have been claimed

3. Capital Gains Tax Deferral 

  • Up to 50% of gains made in a tax year that are subject to CGT are exempted where those gains are invested into an SEIS qualifying company
  • All capital gains can be deferred when those gains are invested into EIS
  • The deferral period is for the duration that the SEIS shares are held
  • The disposal of the asset that gave rise to the chargeable gain must have been within 36 months before or 12 months after the SEIS investment

4. Loss Relief

  • If SEIS or EIS shares are disposed of at a loss, this loss can be offset against the investor’s income tax or capital tax liabilities in the year of disposal or previous year
  • The loss on which tax relief is given is net of any income tax relief obtained when the investment was made

5. Inheritance Tax Relief

  • Shares in SEIS qualifying companies will normally qualify for Business Property Relief for Inheritance Tax purposes
  • Relief can be up to 100% so long as the shares are held for at least 2 years

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