New Proposed Seed Enterprise Investment Scheme (SEIS)

In the Autumn Statement the Chancellor announced a new Seed Enterprise Investment Scheme (SEIS) which will become available from 6 April 2012.

This scheme from will offer individuals 50% income tax relief if they invest in shares of qualifying companies.  A qualifying company is one that is a new (two years old or less) smaller company (With assets up to £200,000 and with a maximum of 25 employees).  The company must be a new business carrying on a trade and must not have previously raised money under EIS or VCT schemes.

The 50% income tax relief is available on the first £100,000 of investment made per annum.  However like EIS this relief will not be available where the individual is an employee of the company and/or where they have more than a 30% interest in it.

Also HMRC intend to offer a capital gains exemption on gains realised in 2012/13 which are reinvested through SEIS in the same year.  This means if you make a disposal, the first £100,000 of the gain can be fully reinvested into SEIS so no capital gains tax becomes due.  Furthermore, provided the qualifying conditions are met, which include that the shares are subscribed for wholly in cash, fully paid for at the time of issue and are held for three years, the onward sale of these shares will also be exempt from capital gains tax.  This therefore potentially allows a complete exemption of capital gains tax unlike rollover relief or holdover relief where the capital gains tax is deferred.

In summary this scheme appears to be a more junior version of the EIS scheme to encourage investment in smaller companies. It contains many of the same limitations around connection with the company, the holding period and the fully paid up in cash requirement.  However, what is particularly attractive is the level of income tax relief at 50% rather than 30% offered by EIS.  However this will have to be weighed up against the additional risk associated with investing in smaller and younger companies.

For further information, (and details on how this differs from the EIS) please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk