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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): re-investment relief: income tax relief restricted: example

In 2012-13 an individual investor carries out the following transactions:

  • He disposes of a property under an unconditional contract dated 1 May 2012 giving rise to an agreed chargeable gain of £130,000.
  • He subscribes £40,000 for and is issued with shares in a SEIS company A Ltd on 1 September 2012.
  • He subscribes £120,000 for and is issued with further shares in another SEIS company B Ltd on 1 December 2012.

He claims full SEIS Income Tax Relief in respect both share issues. He also makes claims for re-investment relief in respect of the amounts subscribed for the shares in both A Ltd and B Ltd.

Section 257AB(2)(b) ITA07 limits the amount on which the investor’s SEIS Income Tax relief is based to £100,000.

Of the £40,000 subscribed for the shares in A Ltd the amount that can be matched with the chargeable gain is limited to

40,000 x £100,000 = £25,000
         
160,000        

Of the £120,000 subscribed for the shares in B Ltd the amount that can be matched with the chargeable gain is limited to

120,000 x £100,000 = £75,000
         
160,000        

The chargeable gain on the property is reduced to £30,000.

Had the transactions been carried out instead in 2013-14, the amounts subscribed for shares that could be matched with the chargeable gain would again be limited to a total of £100,000. After re-investment relief of £50,000 (see VCM45020) the gain on the property would be reduced to £80,000.