PAYE10047 - Coding: coding allowances and reliefs: seed enterprise investment scheme
The Seed Enterprise Investment Scheme (SEIS) was introduced in April 2012 to run alongside the existing Enterprise Investment Scheme (EIS), see PAYE10045. Guidance in the Venture Capital Schemes Manual (VCM) at VCM30000 onwards tells you how to examine claims, the limit on relief and how to calculate the relief.
Rate of relief
Relief is given at 50% of the cost of the qualifying shares acquired on or after 6 April 2012 and is given in terms of tax. The rate differs from that available under the existing Enterprise Investment Scheme and Social Investment Tax Relief (SITR) so it is important that the schemes are not confused.
Interaction with other reliefs
VCM31130 sets out the order in which relief should be given. You will need to take this into account when deciding in what order to calculate coding allowances and deductions.
Coding descriptor to use
Use the coding description Enterprise Investment Scheme; further information can be found at PAYE130025.
Initial action
Where you identify a valid new or existing SEIS claim assess the level of the total relief. There is no need for customers claiming relief of £10,000 or less to be in Self Assessment (SA) so the relief can be given as a coding allowance. For claims totalling more than £10,000 the customer has to be in SA although the relief can still be given as a coding allowance.
For claims totalling over £10,000 check whether the customer has an SA record.
The customer does not have a live / dormant Self Assessment (SA) record
- Set up an SA record in accordance with SAM100000 onwards
- Ensure the SA start date is set in accordance with PAYE93032
The customer does have a live / dormant SA record
- Re-open the dormant SA record in accordance with SAM101093
- Ensure the SA start date is set in accordance with PAYE93032
- Make an SA note to state the reason why the record has been reopened
How to calculate coding allowance for Seed Enterprise Investment Relief
Identify the amount due for SEIS relief and then carry out the following adjustment on this amount to ensure that the coding allowance is correctly calculated by NPS to give the 50% entitlement.
Amount due (A) multiplied by 50 and then divided by 100. This gives the relief due at 505 (B). Then multiply by 100 before dividing by 30 to arrive at the allowance (C).
Enter the calculated amount (C) in IABD (PAYE130025).
For example, for an individual who has subscribed to qualifying shares £5,000
Amount due £5,000 (A) x 50 / 100 = £2,500 (B) x 100 / 30 = £8,334 (C)
- Enter £8,334; in all cases, regardless of the rate at which an individual is liable to pay tax, NPS will calculate an SEIS relief amount for the current year as £2,500
NPS will then calculate the coding allowance based on the individual’s highest rate of liability at the primary coded source
Example – England, N.Ireland and Wales income tax rates 2016 to 2017 and 2017 to 2018
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by basic rate = £12,500 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the first higher rate = £6,250 coding allowance
- For an individual liable at the second higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate = £5,000 coding allowance
Example – Scottish income tax rates 2016 to 2017 and 2017 to 2018
Where the Scottish Rate of Income Tax applies NPS will use the appropriate rates to calculate the relief.
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate = £12,500 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers first higher rate = £6,250 coding allowance
- For an individual liable at the Scottish rate for Scottish taxpayers second higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate = £5,555 coding allowance
Example – Scottish income tax rates 2018 to 2019 until 2022 to 2023
Where the Scottish Rate of Income Tax applies NPS will use the appropriate rates to calculate the relief.
- For an individual liable at starter rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £13,158 coding allowance
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £12,500 coding allowance
- For an individual liable at the intermediate rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers intermediate rate (21%) = £11,905 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers first higher rate (41%) = £6,098 coding allowance
- For an individual liable at the Scottish rate for Scottish taxpayers second higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate (46%) = £5,435 coding allowance
Example – Scottish income tax rates 2023 to 2024 onwards
Where the Scottish Rate of Income Tax applies NPS will use the appropriate rates to calculate the relief.
- For an individual liable at starter rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £13,158 coding allowance
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £12,500 coding allowance
- For an individual liable at the intermediate rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers intermediate rate (21%) = £11,905 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers first higher rate (42%) = £ 5,953 coding allowance
- For an individual liable at the Scottish rate for Scottish taxpayers second higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate (47%) = £5319 coding allowance
Example – Scottish income tax rates 2024 to 2025 onwards
Where the Scottish Rate of Income Tax applies NPS will use the appropriate rates to calculate the relief.
- For an individual liable at starter rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £13,158 coding allowance
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £12,500 coding allowance
- For an individual liable at the intermediate rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers intermediate rate (21%) = £11,905 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers first higher rate (42%) = £ 5,953 coding allowance
- For an individual liable at the second higher rate the amount will be £2,500 multiplied by 100 divided by the total rate for Scottish taxpayers first higher rate (45%) = £ 5,556 coding allowance
- For an individual liable at the Scottish rate for Scottish taxpayers third higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate (48%) = £5509 coding allowance
Example - Welsh income tax rates 2019 to 2020
- For an individual liable at basic rate the amount will be £2,500 multiplied by 100 divided by basic rate = £12,500 coding allowance
- For an individual liable at the first higher rate the amount will be £2,500 multiplied by 100 divided by the first higher rate = £6,250 coding allowance
- For an individual liable at the second higher rate the amount will be £2,500 multiplied by 100 divided by the additional rate = £5,000 coding allowance
Claims for a combination of EIS, SEIS and SITR
In situations where claims are made for a combination of reliefs the above guidance should be followed in conjunction with that for EIS at PAYE10045 and SITR at PAYE10048 with a combined figure being entered in IABD.
As claimants with relief over £10,000 will be within SA, any inaccuracy in the relief given can be corrected when the return is submitted.
In all cases write to the customer explaining how you have included a figure for SEIS relief in their tax code that, whilst different from the amount invested in shares, will ensure that the correct amount of tax relief is given.
You must make a Contact History note which clearly explains the action taken to calculate the amount included in the code.