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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: income tax relief reduced: example 2

TCGA92/S150F (3)

In this example TCGA92/S150E(2) applies and TCGA92/S150E(5) applies also to restrict the exemption.

  • December 2012 investor subscribes £150,000 for 100,000 shares in a SEIS company. Maximum Income Tax relief of £50,000 is given in the tax year 2012-13 applying the SEIS rate 50%.
  • January 2014 the investor receives £20,000 value from the company. The Income Tax relief is reduced by £6,666 (£10,000 x £100,000 / £150,000) by making an assessment.
  • January 2018 all the shares are sold for £270,000.

The chargeable gain before any exemption under section 150E(2) is calculated:

Disposal proceeds £270,000
   
Less cost £150,000
Chargeable gain £120,000

The TCGA92/S150E (5) formula is:

R = Amount of tax relief = £50,000
         
T   Subscription x SEIS rate   £75,000

The chargeable gain exemption is restricted to £120,000 x 2/3 = £80,000 leaving a chargeable gain at this point of £40,000.

The TCGA92/S150F (2) formula is

A = Reduction in relief
     
B   Relief attributable to shares before the reduction

The exemption is further reduced by the following amount:

£80,000 x £6,666 = £10,666
         
    £50,000    

The exempt gain becomes £69,334 and the chargeable gain £50,666 (£40,000 + £10,666).