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