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HMRC internal manual

Venture Capital Schemes Manual

Seed Enterprise Investment Scheme (SEIS): re-investment relief: reduction in income tax relief attributable to shares before re-investment relief obtained: 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 £150,000
  • 1 June 2012 he subscribes £100,000 for 100,000 ordinary shares in a SEIS company.
  • 1 December 2012 he receives £20,000 value from the company.

Later he claims SEIS Income Tax relief and CG re-investment relief in respect of his subscription

Based upon the £100,000 subscription the investor would have been eligible for maximum Income Tax relief £50,000 in 2012-13. After reduction in respect of the earlier value received, he obtains relief £40,000.

Of the £100,000 subscribed for the shares the amount that may be matched with the chargeable gain is limited to

100,000 x £40,000 = £80,000

The chargeable gain on the property is reduced to £70,000.

Had the transactions been carried out instead in 2013-14, the amount subscribed for SEIS shares that could be matched with the chargeable gain would again be limited to £80,000. After re-investment relief of £40,000 (see VCM45020) the gain on the property would be reduced to £110,000.