Seed Enterprise Investment Scheme (“SEIS”) Print
SEIS was originally introduced for a 5-year period from 6 April 2012. The Finance Act 2014 has made this relief permanent. SEIS is specifically aimed at helping companies in their pre-trading, formative state. There is an upper limit of £150,000 on the amount of qualifying SEIS that may be raised by any one company.
The maximum investment by an individual is £100,000, and tax relief is given at the rate of 50%, even where the individual pays tax at a lower rate. As for EIS, similar restrictions prevent employees from qualifying for the relief, and the maximum investment by an individual is limited to 30% of the SEIS company.
Unlike EIS, a qualifying investment in a SEIS company cannot be used to defer gains made on the disposal of other chargeable assets. Instead where the SEIS investment is made out of the gains arising on the realisation of other assets, then 50% of the gain reinvested into the SEIS company is exempt from CGT. Accordingly, the effective rate of CGT relief is up to 14%.
A claim for SEIS may be made to treat the investment as made in the previous year, so SEIS investments made during the year 2015/16 will be able to be treated as made in 2014/15. A claim to carry back the SEIS relief to the previous year must incorporate both parts of the relief. It is not possible to claim the income tax element of the relief in say 2015/16 and to carry the CGT element back to 2014/15.
Gains on the disposal of SEIS shares held for the qualifying 3-year period are exempt from CGT.
As the relief is targeted for investment in pre-trading companies this type of investment is very high risk, and is limited to the smallest companies with 25 employees or fewer and assets of up to £200,000.