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HMRC internal manual

Venture Capital Schemes Manual

Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: Income Tax relief restricted

TCGA92/S150E (4) and (5)

The CGT exemption will be restricted if:

  • the investor does not receive full Income Tax relief on their subscription, see VCM36000+,


  • the only reason full Income Tax relief cannot be given is because the claim reduces the investor’s Income Tax liability to nil, see VCM40060.

The restriction will usually apply when an investor subscribes more than the amount on which Income Tax relief is available. Income Tax relief in any year of assessment may not exceed tax at the SEIS rate, 50 percent, on £100,000.

For example, on 1 December 2012 an individual may subscribe £150,000 for 100,000 shares in a SEIS company. Income Tax relief will only be given on £100,000 of the subscription. The CGT exemption only applies to a proportion of the gain on the disposal or part disposal of the 100,000 shares. You calculate the proportion of the gain which is CGT-exempt using the fraction R / T where:

R = the amount by which the individual’s Income Tax liability is actually reduced, and

T = the amount of the subscription x the SEIS rate.

The effect of this formula is illustrated by the example at VCM40050.

This restriction does not apply if the shares are sold at a loss.

See VCM40100 for the treatment of losses.