Rennie Welch LLP
Q: I am considering making an investment in a new start-up company via the Seed Enterprise Investment Scheme. What are the tax incentives that this scheme offers?
A: The Seed Enterprise Investment Scheme (SEIS) was introduced in 2012 to encourage individuals to invest in small start-up companies by offering attractive tax incentives to investors.
The main tax benefits that may be available to the investor are:
- Income Tax relief of up to 50% of the amount invested, up to a maximum investment of £100k per annum.
- Capital Gains Tax Reinvestment relief - exemption against gains arising on the disposal of other assets, which have been reinvested in SEIS shares during the same tax year, of up to 50% of the amount of gains reinvested. Maximum investment £100k per annum.
- Capital Gains Tax Disposal Relief - exemption for gains arising on the disposal of the SEIS shares after 3 years.
- Loss relief where the SEIS shares are disposed of at a loss.
- Business Property Relief for Inheritance Tax purposes after 2 years of ownership.
The investment must be a qualifying investment by a qualifying investor in a qualifying company which is, or will be, carrying out a new qualifying trade. Various conditions apply.
The SEIS shares must be held, and continue to qualify, for at least 3 years from issue. If the shares are not held for 3 years, or, the qualifying conditions cease to be met during that 3 year period, some or all of the tax relief may be withdrawn.
Any dividend income received from the SEIS shares is taxable in the same way as other dividends and should be reported on the investor’s Tax Return accordingly.
The type and level of tax relief available will depend on the individual circumstances of the investor and detailed advice should be obtained before entering into any transaction.
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