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HMRC internal manual

Venture Capital Schemes Manual

Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: CGT exemption

TCGA92/S150E (2)

As the relief applies only to shares issued on or after 6 April 2012 the earliest the CGT exemption can apply is 6 April 2015. A gain on a disposal of shares on which SEIS Income Tax relief has been claimed may be exempt if the disposal is made on or after the third anniversary of the date on which the shares were issued.

If the shares are disposed of before this date, the Income Tax relief or part of it will be withdrawn, see VCM36020. There is no CGT exemption for any gain arising on such a disposal.

The investor may not be able to obtain Income Tax relief because their total income is too low or their income tax liability is reduced to nil by other reliefs. If the investor does not obtain any Income Tax relief on a subscription for shares in a SEIS company there is no CGT exemption for those shares. However, CGT exemption is available if some Income Tax relief is given even though the effect of the claim is to reduce the investor’s Income Tax liability to nil, see VCM40060.

If Income Tax relief is obtained in full (that is, the amount of relief is equal to tax at the SEIS rate on the full amount of the subscription), and it is not withdrawn or reduced, there is no restriction on the CGT exemption. For example, in December 2012 an investor subscribes £50,000 for 200,000 25p ordinary shares in a SEIS company. The investor receives £25,000 Income Tax relief, none of which is subsequently withdrawn. All 200,000 shares would qualify for CGT exemption on disposals made on or after the third anniversary of the date of issue.