Risk warning: An investor’s eligibility to receive tax relief depends on their individual circumstances and on the company’s qualifying status, both of which may be subject to change. If you are unsure about your ability to claim certain tax reliefs, you should seek independent tax advice before making an investment.

What is SEIS Tax relief?

SEIS (Seed Enterprise Investment Scheme) is a tax relief scheme that was introduced in 2011 by the UK Government in addition to the existing EIS (Enterprise Investment Scheme) tax relief scheme already implemented in 1994. SEIS was introduced with the intention of further boosting economic growth in the UK by promoting new enterprise and entrepreneurship.

A major difference between the EIS and SEIS schemes is the increase in possible ‘cash back’ – from 30% for EIS eligible investments to 50% for those that are SEIS.

Investing in seed-stage, high-risk companies that qualify for SEIS can offer considerable tax relief to investors.

Why invest in SEIS with Capital Cell?

  • Get up to 50% cash back on investments through the Seed Enterprise Investment Scheme
  • Help contribute to the growth of innovative seed stage life sciences companies with a high social impact
  • Grow a more stable, diverse portfolio, with investments from as little as £500
  • Carefully select the companies you invest in and the angels you invest alongside
  • Receive the relevant certificates you need directly to make your tax relief claim

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What tax relief is available?

1. Income tax relief

This form of Tax Relief is available to investors who buy qualifying shares in a company that meets the SEIS requirements. Investors don’t need to be a UK resident but they must have UK tax liability to set the relief against. The shares must be held for at least 3 years from their date of issue for relief to be retained. The relief will be withdrawn or reduced if they are disposed of before the end of that 3 year period or if any of the qualifying conditions cease to be met during that time.

Tax Relief is available at 50% of the cost of the shares (on a maximum annual investment of £100,000) and is given as a reduction of tax liability providing there is sufficient tax liability to set it against. A claim can be made up to 5 years after the 31 January following the tax year in which the investment was made.

In addition, there is a ‘carry back’ facility to SEIS, which allows investors to offset against their tax bills from the previous, as well as the current, year. All, or part, of the cost of the shares acquired in one tax year can be treated as through they were acquired in the preceding tax year. The SEIS rate for the previous year is applied to the shares and relief is given for the earlier year. However, the ‘carry back’ is subject to the overriding limit for each year.

Investors, who are employed by, or connected with, the company they are investing in cannot claim Income Tax Relief on their shares.

Note: SEIS applies for shares issued on or after 6th April 2012, so there is no SEIS rate earlier than 2012 to 2013. Therefore there is no scope for carrying relief back before that year.

2. Capital Gains Tax: reinvestment relief

Originally, this relief was only available for the 2012 to 2013 tax year, however it has been extended to cover subsequent years at 50% of the rate.

If you sold an asset and reinvested all or part of the gain amount in SEIS eligible shares, the amount reinvested may be exempted from Capital Gains Tax. This re-investment relief is subject to the annual investment limit of £100,000, which applies for income tax relief. Therefore up to £100,000 may be exempted for 2012 to 2013 gains, whereas for 2013 to 2014 onward the sum is up to £50,000.

The SEIS shares investment can take place before the disposal of the asset, providing that the disposal and the investment both happen in the same year. For guidance on when an asset is disposed of for Capital Gains Tax purposes, check the Capital Gains Manual.

Note: If the ‘carry-back’ facility is used, any claim made for reinvestment relief must match the year in which the shares are then treated as issued. 

3. Capital Gains Tax: disposal relief

If the shares are sold after they have been held for at least 3 years and you have received income tax relief on the cost of those shares, any profit is free from Capital Gains Tax.

If no claim to income tax relief is made for those shares, then any other sale of the shares will not qualify for exemption from Capital Gains Tax.

The investor’s gain is equal to the £10,000 profit from the sale of shares, plus the £5,000 Income Tax Relief

The investor’s gain is equal to the £5,000 Income Tax Relief

The investor’s loss is equal to the £10,000 investment, minus the £5,000 Income Tax Relief and £2,250 Loss Relief.

Which investments on Capital Cell are eligible for Tax Relief?

SEIS eligibility depends on a number of different factors and activities carried out by the company. If a very-early stage company has received notice (advance assurance) that HMRC are satisfied that the company and proposed investment should qualify for the tax relief scheme, it will be indicated on their Capital Cell campaign page.
Once the shares have been issued, HMRC will confirm whether the requirements of the scheme have been met.

What do I need to do to receive Tax Relief?

As part of the process of investing through Capital Cell, you will be asked to indicate whether you are a UK taxpayer and whether you would like to claim tax relief on qualifying investments. Once an eligible investment has been made, Capital Cell will provide you with a certificate, which can be used to make a claim through your self-assessment tax return (form EIS3 for EIS, or form SEIS3 for SEIS).
Claims for SEIS ‘cash back’ can be made once the company has been trading for a minimum of 4 months or has spent 70% of the investment they have received.

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Register today to see more detailed investment information