Contributed by ACCA, in their own words
The SEIS initiative to get equity investment into companies has been extended.
The excellent SEIS initiative to get equity investment into companies like SEIS has been extended. SEIS was originally announced in the 2012 Budget and offers would-be investors generous tax breaks for investing in small, start-up type businesses. It is aimed at investors and entrepreneurs who will assist in developing a business that might otherwise never gain funding.
The Scheme was not permanent, but ran from 6 April 2012 to 5 April 2017. Finance Act 2014 will make the Scheme permanent. The investment limit for a qualifying individual in a fiscal year is £100,000 and cannot claim tax relief until the company has spent at least 70% of the money invested.
SEIS represented an extension of the existing Enterprise Investment Scheme (EIS) – with enhanced tax benefits – and is intended to help small, early-stage companies to raise equity finance.
Under the scheme:
- taxpayers who invest up to £100,000 in a qualifying new start-up business will be eligible for income tax relief of 50%. This is compared to the normal 30% tax relief available under EIS. Finance Act 2014 will now introduce legislation to make SEIS relief available without limit
- the 50% tax ‘reducer’ applies irrespective of the rate at which the investor pays tax
- capital gains arising on the disposal of an asset in 2012-13 and invested through the SEIS in the same year will be completely exempt from CGT. This is more attractive than EIS, under which reinvested gains are merely held-over until the EIS shares are sold
- for 2013/14 gains, the CGT reinvestment relief was reduced to 50% of the reinvested gain. Finance Act 2014 will introduce legislation to extend the relief for 50% of the reinvested gains, permanently.