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Seed Enterprise Investment Scheme – a great tax reducer

Paystream News

David McManus

Thursday 24th Nov, 2016

The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies.

Income Tax relief is available to individuals who subscribe for qualifying shares in a company which meets the SEIS requirements, and who have UK tax liability against which to set the relief. The shares must be held for a period of 3 years, from date of issue, for relief to be retained.

Relief is available at 50% of the cost of the shares, on a maximum annual investment of £100,000. It's given by way of a reduction of tax liability and a claim to relief can be made up to 5 years after the 31 January following the tax year in which the investment was made. It is a flexible relief. There is a 'carry-back' facility which allows all or part of the cost of shares acquired in one tax year to be treated as though the shares had been acquired in the preceding tax year.

If you have received income tax relief on the cost of the shares, and the shares are sold after they have been held for at least 3 years, any profit is free from Capital Gains Tax. As the investment is into new companies there is obviously an element of risk and you should consider consulting a Financial Advisor before making any specific SEIS investment decisions.

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