Invest in an SEIS or EIS company
The SEIS and EIS regimes offer a range of tax reliefs to individual investors who purchase new shares in qualifying companies in a bid to encourage investment in such companies and to help them raise equity finance.
Both regime’s have qualifying criteria for the type of shares, the company being invested in and the investor, and therefore early planning is required if the valuable tax reliefs are to be secured on investment.
Income Tax relief
Under the SEIS regime income tax relief at the rate of 50% is available on a maximum annual investment of £100,000. The EIS regime is slightly less generous but still offers income tax relief of 30% on a maximum annual investment of £1m.
Income tax relief is available to individuals who subscribe for qualifying shares in a company which meets the requirements. It is not necessary for investors to be resident in the UK but they do need a UK income tax liability against which to set the relief.
In order to obtain the relief, the shares must be held for a minimum of three years from the date of issue. If the shares are disposed of within this period or if any of the qualifying conditions cease to be met, the relief may be withdrawn.
In some circumstances it may be beneficial for the investor to elect to treat all or part of the investment as though it was made in the previous tax year.
Capital gains tax reinvestment relief
If an asset is disposed of and the proceeds are reinvested in SEIS qualifying shares, capital gains tax relief of 50% of the investment is available.
It is not necessary to dispose of the chargeable asset first. The investment in SEIS shares can be made before the disposal, on the condition that both the disposal and investment occur within the same year.
In terms of the EIS scheme capital gains tax can be deferred if capital proceeds are invested in EIS shares. The gain can be realised from any asset but the share investment must take place in the period of one year before or three years after the disposal of the asset.
Capital gains tax disposal relief
Any gain resulting from the sale of the SEIS or EIS shares will be exempt from capital gains tax provided that they have been held for a minimum of three years and income tax relief has been claimed on the cost of the shares.
Furthermore under both schemes if you may a loss on the investment, income tax relief may be available on the financial loss suffered.
If you are interested in investing in qualifying EIS or SEIS shares please contact us for advice in order to ensure you secure theses valuable tax reliefs.