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This publication is available at https://www.gov.uk/government/publications/seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-hs393-self-assessment-helpsheet/hs393-seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-2017
This helpsheet explains how to claim Income Tax relief and 2 Capital Gains Tax reliefs (reinvestment relief and disposal relief) under the Seed Enterprise Investment Scheme (SEIS). It also gives some guidance on the circumstances in which an investor is eligible to make a claim. For more information, see Investment schemes.
There are several references below to form SEIS3 ‘Seed Enterprise Investment Scheme Certificate’. This form is provided to you by the company invested in to certify that certain conditions of the scheme are satisfied.
Income Tax relief
The circumstances in which you can claim Income Tax relief
If you’ve received a form SEIS3 for any investment you made in shares issued during the year ended 5 April 2017, you can claim relief provided you’re eligible for relief for the shares.
How to claim Income Tax relief
Enter in box 10 in the ‘Other tax reliefs’ section on page Ai 2 of the Additional information pages, the total amount of the subscriptions on which you’re now claiming relief (but not more than the maximum figure of £100,000). Include any amount for which you received relief by way of an increase in your PAYE code or a reduction of a payment on account.
Then enter details of each investment in the ‘Any other information’ box, box 19, on page TR 7 of the tax return.
The details needed for each investment are:
- the name of the company invested in
- the amount on which you’re claiming relief for this year
- the date of issue of the shares
- the name of the HM Revenue and Customs (HMRC) office authorising the issue of the certificate, and their reference (as shown on the certificate)
- if you’ve subscribed more than £100,000 for shares on which relief could be claimed, how you want the relief attributed to them - see How much Income Tax relief can you get for your subscriptions for shares below
List all subscriptions on which relief is claimed, even if you had to restrict the amount you entered in box 10 in the ‘Other tax reliefs’ section on page Ai 2 of the Additional information pages, because it would have exceeded the maximum.
We may ask to see form SEIS3 to support your claim, so keep it safe.
If you made an investment in shares issued during the year for which you’ve not yet received a form SEIS3, you can’t claim relief for it until you do. If you receive the form after you have sent your tax return, complete the claim form which is incorporated in it and send it to HMRC.
Who can claim Income Tax relief
You’re eligible to claim the relief unless any of the following apply:
- you subscribed for the shares as part of a scheme or arrangement aimed at avoiding tax
- you subscribed for the shares as part of an arrangement with another person which results in another person subscribing for shares in a company in which you have, or another individual party to the arrangements has, a substantial interest
- you received a loan which would not have been made, or would not have been made on the same terms, were it not for the investment in the shares (HMRC Statement of Practice 6/98 provides more information on this)
- the share issue includes arrangements which:
- secure a return on your investment
- will enable you to dispose of your shares at a future date
- provide protection against the normal commercial risks attaching to an investment of this kind
- you’ve an option under which you can require someone else to buy the shares
- you are, or an associate is, an employee of the company
- you, either individually or together with your associates, have a ‘substantial interest’ in it
A ’substantial interest‘ means controlling the company, or possessing more than 30% of the company’s share capital or more than 30% of the voting power in the company, or being entitled to more than 30% of the company’s assets in a winding-up. (This does not apply, subject to certain conditions, at any time when the only shares issued are the original subscriber shares.)
For this purpose, an ‘associate’ includes a spouse or civil partner, lineal ancestor or descendant, a business partner and certain persons with whom you have connections via a trust.
What if the shares were issued to you and someone else jointly
Where shares are issued to joint owners, they are treated as if each of them had subscribed the same amount for an identical number of shares. For example, if £2,000 is subscribed for 2,000 shares in the name of a married couple, each is regarded as having subscribed £1,000 for 2,000 shares. That is so even if one of them paid the whole amount.
In order to claim relief, each joint owner should obtain form SEIS3 from the company.
Can you choose to have the Income Tax relief for a different year
The general rule is that the relief is available for the tax year in which the shares are issued. For tax year 2013 to 2014 onwards it’s possible to treat some or all of the shares as issued in the previous year and claim relief in that previous year, subject to the £100,000 maximum relief limit for the year. You’ll find the date of issue of your shares recorded on form SEIS3.
If you want to make use of this option enter on your tax return the amount which you want to claim for in tax year 2016 to 2017, including any amounts invested in tax year 2017 to 2018 for which you already hold a valid SEIS3 and which you want to have relieved in tax year 2016 to 2017 - remember, the maximum you can claim in total for tax year 2016 to 2017 is £100,000.
If you want to treat some or all of the shares subscribed for in tax year 2016 to 2017 as though subscribed for in tax year 2015 to 2016, complete the claim form which is incorporated in form SEIS3 to show the amount on which you’re claiming relief for the previous year and send it to HMRC.
How much Income Tax relief can you get for your subscriptions for shares
Subject to what follows, you can get relief at the rate of 50% on the aggregate of the amounts claimed for shares issued to you in tax year 2016 to 2017.
However, you can’t get relief on more than £100,000 and if your tax liability is not high enough to absorb all the relief, you have to forgo the excess. In either of these cases, you can opt for the relief to be attributed to certain shares, or to be attributed proportionally to all the shares. For example, if you had subscribed £50,000 for shares in each of 4 companies, but you’re limited to claiming relief on £100,000, you could opt for relief to be given at 50% on the subscriptions for all the shares in 2 of those companies, or you could opt for relief to be given at 25% on all the shares in the 4 companies. You may want to take professional advice on which course to take.
Also, if you’ve received value from the company, the amount on which you claim relief must be restricted (the company will have stated the amount on form SEIS3).
The notes on form SEIS3 explain situations where your relief must be withdrawn or reduced, and in which you would be obliged to make a report to HMRC.
Capital Gains Tax reliefs
There are 2 Capital Gains Tax reliefs within the SEIS:
- reinvestment relief, where a gain arising in tax year 2016 to 2017 on a disposal of any asset is reinvested in shares in a company on which you get SEIS Income Tax relief
- disposal relief, where shares in a SEIS company are disposed of after having been held for 3 years and certain criteria are met
What is reinvestment relief
When you dispose of an asset and make a gain you usually pay Capital Gains Tax for the tax year in which you dispose of the asset. Reinvestment relief enables an individual that has disposed of an asset - that would give rise to a chargeable gain - to treat a maximum of 50% of the gain as exempt from Capital Gains Tax, where they have reinvested all or part of the amount of the gain in qualifying SEIS shares.
If you get SEIS Income Tax relief on an acquisition of shares, then you can claim reinvestment relief as well. You can’t get reinvestment relief unless you also get SEIS Income Tax relief. To get full reinvestment relief you must invest in qualifying SEIS shares an amount at least equal to the chargeable gain. See the Capital Gains Tax summary notes. If you invest less, reinvestment relief is limited to half the amount invested.
Which gains can you claim to be exempt
If you dispose of any asset in tax year 2016 to 2017 and a gain arises in that year, an amount of which is then reinvested, you can make a claim to treat 50% of the gain as exempt from Capital Gains Tax up to a maximum of £50,000.
Which SEIS shares qualify for reinvestment relief
You can claim reinvestment relief if you subscribe for SEIS shares and the shares are issued to you in tax year 2016 to 2017. If the gain for which you’re claiming exemption arose after the SEIS shares were issued to you, you must still hold them at the time the gain arose.
If you’re issued SEIS shares in tax year 2017 to 2018, you may claim SEIS Income Tax relief as if all or part had been issued instead in tax year 2016 to 2017. You can claim reinvestment relief for the shares that are treated as issued in tax year 2016 to 2017.
If you’re issued SEIS shares in tax year 2016 to 2017, you may have claimed SEIS Income Tax relief as if all or part had been issued instead in tax year 2015 to 2016. You cannot claim reinvestment relief for tax year 2016 to 2017 for shares that are treated as issued in tax year 2015 to 2016.
How much reinvestment relief can you claim
You can’t claim more than the 50% of the amount on which you receive SEIS Income Tax relief for the tax year 2016 to 2017. The maximum amount of SEIS Income Tax relief that can be claimed is £100,000, therefore the maximum amount of reinvestment relief which can be claimed is £50,000.You may claim less than the maximum reinvestment relief available to you, for example, if you want to make full use of your annual exempt amount.
You have a gain of £15,000 on a disposal in tax year 2016 to 2017. You subscribe £14,000 for 10,000 SEIS shares issued to you in the same tax year and get full SEIS Income Tax relief. The annual exempt amount for the tax year is £10,900. You can claim reinvestment relief on £7,000 of the gain of £15,000 or on any smaller amount, for example £4,100, leaving £10,900 to be covered by your annual exempt amount.
The notes on form SEIS3 explain situations where your relief must be withdrawn or reduced.
How do you claim reinvestment relief
You must complete the claim form attached to the SEIS3 certificate you should receive from the company you’ve invested in and attach the form to the ‘Capital Gains Tax summary’ pages of your tax return. Please put the 3-letter code ‘OTH’ in box 28 on page CG 2 of the Capital Gains Tax summary pages and provide details of the claim in the ‘Any other information’ box, box 54, or in your computation, providing a clear statement that you’re claiming SEIS reinvestment relief.
Enter in box 40 the total of all your gains made on the disposal of assets in the year to 5 April 2017 which are claimed to be exempt because of reinvestment into shares issued to you, or treated as issued to you, in that year by one or more SEIS companies. Enter the total of the amounts claimed to be exempt, not the full amount of the gains. This figure shouldn’t exceed £50,000.
If you’re claiming after you have sent your tax return, complete the SEIS3 claim form and send it to HMRC.
What is the time limit for claiming reinvestment relief
You can’t make a claim before you’ve received the relevant form SEIS3. The latest date for making a claim is 31 January 2023.
What is disposal relief
If disposal relief is due you won’t have to pay Capital Gains Tax on a gain on your disposal of SEIS shares. The following conditions have to be met:
- you must have held the SEIS shares for at least 3 years - SEIS shares can’t be acquired before tax year 2012 to 2013 so disposal relief will first be potentially available on disposals from 6 April 2015 to 5 April 2016
- you must have received SEIS Income Tax relief in full on the whole of your subscription for the SEIS shares and none of the Income Tax relief must have been withdrawn
You may not have to pay Capital Gains Tax on a gain on your disposal of the SEIS shares, even if you didn’t receive Income Tax relief in full on all your SEIS shares, provided you received some Income Tax relief. In this case, to qualify for disposal relief, none of that Income Tax relief must have been withdrawn and the only reason you did not receive Income Tax relief in full was that your claim reduced your Income Tax liability to nil. If you’ve no liability to Income Tax before taking account of your subscription for SEIS shares, you’ll receive no Income Tax relief and any gain on the disposal of the SEIS shares will be chargeable.
Only part of your gain may not be chargeable to Capital Gains Tax if part of the Income Tax relief on those shares has been withdrawn or if your acquisitions in the year exceed the maximum subscription.
When is disposal relief not due
There’s no disposal relief on any gain arising on a disposal within 3 years of the date the SEIS shares were issued to you. You can find the actual date of issue on the form SEIS3 which the company sent you. If you sell SEIS shares within 3 years of the date they were issued (and the sale is not to your spouse or civil partner), SEIS Income Tax relief for those you sell will be wholly or partly withdrawn. If you make a gain on the disposal, it will be chargeable to Capital Gains Tax.
Can you claim a loss
If you make a loss on a disposal of your SEIS shares at any time, you can set this loss against your chargeable gains. In computing the loss, you must reduce the cost of your shares by the amount of any Income Tax relief given and not withdrawn.
Example 2 - where you sell your shares at a loss
You subscribe £100,000 for 20,000 SEIS shares on 1 May 2013. Income Tax relief of £50,000 is given. Less than 3 years later you sell all 20,000 shares for £60,000. Income Tax relief of £30,000 is withdrawn. Income Tax relief of £20,000 is not withdrawn and remains attributable to the shares sold.
The allowable loss is calculated as follows:
|Reduced by the Income Tax relief which has not been withdrawn||(£20,000)|
Page CGN 2 of the Capital Gains Tax summary notes explains how losses are allowed for capital gains purposes.
Online forms, phone numbers and addresses for advice on Self Assessment.