What tax relief is available to investors?

📘 Overview

Investors in companies qualifying under SEIS or EIS can benefit from five main types of tax relief.

The following outlines the key features of each relief and the conditions that apply.

💡 1. Income Tax Relief

Investors can claim tax relief against their personal income tax liability based on the amount invested.

Key Conditions

• Relief can be carried back to the previous tax year.
• Shares must be held for at least three years.
• There is no minimum investment amount.
• Shares must be fully paid at issue and must be full-risk ordinary shares (no preferential rights).

💡 Example:

If an investor puts £50,000 into a SEIS-qualifying company, they can reduce their income tax bill by £25,000 for that tax year (or carry it back one year).

🔍 2. Capital Gains Tax (CGT) Exemption

When the shares are sold, any gain is exempt from CGT provided the following conditions are met:

• The shares are held for at least three years.
• Income Tax Relief has been successfully claimed.

💡 This exemption can make a significant difference when a company’s value grows substantially before exit.

📊 3. Capital Gains Tax Deferral

Both SEIS and EIS allow investors to defer or exempt gains from other disposals when reinvested in qualifying shares.

Time Limits

• The asset giving rise to the gain must have been disposed of within 36 months before or 12 months after the SEIS/EIS investment.
• The gain remains deferred for as long as the new shares are held.

💡 4. Loss Relief

If the investment is disposed of at a loss, investors can offset that loss against income tax or capital gains tax.

Key Points

• The loss is calculated after deducting any income tax relief already received.
• Relief can be claimed in the year of disposal or carried back to the previous year.

💡 Example:

If an investor loses £10,000 on SEIS shares after receiving 50% income tax relief (£5,000), the remaining £5,000 loss can be set against income tax or capital gains.

✅ 5. Inheritance Tax Relief

Shares in SEIS and EIS companies normally qualify for Business Property Relief (BPR).

This means that, provided the shares are:

• Held for at least two years, and
• The company still qualifies as a trading business,

…the shares may receive up to 100% Inheritance Tax relief.

💡 In practical terms, this means that SEIS/EIS shares can often be passed on to beneficiaries free of Inheritance Tax.

Summary of Reliefs