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HMRC internal manual

Venture Capital Schemes Manual

Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: income tax relief reduced


The CGT exemption may have to be restricted if the investor’s Income Tax relief is reduced because they have received value from the company and ITA07/S257FE(2)(a) applies, see VCM36040.

The restriction is calculated as follows:

  • compute the chargeable gain in the normal way including the operation of TCGA92/S150E(5), see VCM40040.
  • reduce the exemption by an amount calculated by multiplying the gain by the fraction:
A = Reduction in Income Tax relief
B   Total relief attributable to the shares before any reduction

If TCGA92/S150E (5) applies to reduce the exempt gain, the fraction above should be applied to the exempt part of the gain and the reduction made from that part. If the relief has been reduced on more than one occasion the numerator of the fraction is the total amount of all the reductions.

The effect of this formula is illustrated by examples at VCM40080 and VCM40090.