PAYE10048 - Coding: coding allowances and reliefs: social investment tax relief
As part of the Spring Budget 2023, the Social Investment Tax relief scheme ceased for new investments under a sunset clause.
Social investment tax relief will not be available for new investments after 6 April 2023.
In relation to earlier years, the time limit for making a claim is 5 years after 31 January following the tax year in which the investment is made. Taxpayers have until 31 January 2029 to claim relief for investments made in 2022 to 2023.
Social Investment Tax Relief (SITR) was launched in April 2014.
Guidance in the Venture Capital Schemes Manual (VCM) at VCM10000 onwards tells you how to examine claims, the limit on relief and how to calculate the relief.
Rate of relief
From 6 April 2014 relief is given at 30% of the cost of the shares and is given in terms of tax.
Note: The rate differs to that available under the similar Seed Enterprise Investment Scheme (SEIS) see PAYE10047, so it is important that the 2 schemes are not confused.
Interaction with other reliefs
VCM10530 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 Enter Investment Scheme - further information can be found at PAYE130025. There are no plans to introduce a special coding deduction to claw back any excess relief. Instead, the coding allowance should be in such a figure as will give the correct amount of relief. Make sure the individual has an explanation.
Initial action
Where you identify a valid new or existing SITR 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 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 social investment tax relief
Identify the amount due for relief using the guidance in the Venture Capital Schemes Manual (VCM) at VCM10000 onwards. Enter that amount in IABD (PAYE130025) and NPS will calculate the coding allowance regardless of the rate at which the individual is liable to pay tax.
For example, for an individual who has subscribed to qualifying shares £5,000, EIS relief will be calculated for the current year as £5,000 multiplied by 30 and divided by 100 = £1,500.
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 2016-17 and 2017-18
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by basic rate = £7,500 coding allowance
- For an individual liable at the first higher rate the amount will be £1,500 multiplied by 100 divided by the first higher rate - £3,700 coding allowance
- For an individual liable at the second higher rate the amount will be £1,500 multiplied by 100 divided by the additional rate = £3,000 coding allowance
Where the Scottish Rate of Income Tax applies, NPS will use the appropriate rate to calculate the coding allowance based on the individual’s highest rate of liability at the primary coded source.
Example – Scottish income tax rates 2016-17 and 2017-18
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate = £7,500 coding allowance
- For an individual liable at the first higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers first higher rate - £3,750 coding allowance
- For an individual liable at the second higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers additional rate = £3,333 coding allowance.
Example – Scottish income tax rates 2018-19 until 2022-23
- For an individual liable at starter rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £7,895 coding allowance
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £7,500 coding allowance
- For an individual liable at intermediate rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at intermediate rate (21%) = £7,143 coding allowance
- For an individual liable at the first higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers first higher rate (41%) = £3,659 coding allowance
- For an individual liable at the second higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers additional rate (46%) = £3,261 coding allowance.
Example – Scottish income tax rates 2023-24
- For an individual liable at starter rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £7,895 coding allowance
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £7,500 coding allowance
- For an individual liable at intermediate rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at intermediate rate (21%) = £7,143 coding allowance
- For an individual liable at the higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers first higher rate (42%) = £ 3,572 coding allowance
- For an individual liable at the top rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers additional rate (47%) = £ 3,192 coding allowance.
Example – Scottish income tax rates 2024-25 onwards
- For an individual liable at starter rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at starter rate (19%) = £7,895 coding allowance
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at basic rate (20%) = £7,500 coding allowance
- For an individual liable at intermediate rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers at intermediate rate (21%) = £7,143 coding allowance
- For an individual liable at the higher rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers first higher rate (42%) = £ 3,572 coding allowance
- For an individual liable at the advanced rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers first higher rate (45%) = £ 3,334 coding allowance
- For an individual liable at the top rate the amount will be £1,500 multiplied by 100 divided by the Scottish rate for Scottish taxpayers additional rate (48%) = £ 3,125 coding allowance.
Example –Welsh income tax rates 2019-20
- For an individual liable at basic rate the amount will be £1,500 multiplied by 100 divided by basic rate = £7,500 coding allowance
- For an individual liable at the first higher rate the amount will be £1,500 multiplied by 100 divided by the first higher rate - £3,700 coding allowance
- For an individual liable at the second higher rate the amount will be £1,500 multiplied by 100 divided by the additional rate = £3,000 coding allowance
Claims for combinations of EIS, SEIS and SITR relief
In situations where claims are made for a combination of reliefs, this guidance should be followed in conjunction with that for EIS at PAYE10045 and SEIS at PAYE10047 with a combined figure being entered in IABD.
As claimants will be within SA if the total claim is over £5,000 any inaccuracy in the relief given can be corrected when the return is submitted.
You must make a Contact History note which clearly explains the action taken to calculate the amount included in the code.