Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: income tax relief reduced: example 2
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:
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:
The exempt gain becomes £69,334 and the chargeable gain £50,666 (£40,000 + £10,666).