VCM40090 | Seed Enterprise Investment Scheme (SEIS): SEIS disposal relief: income tax relief reduced: example 2

TCGA92/S150F (3)

In this example TCGA92/S150E(2) applies and TCGA92/S150E(5) applies also to restrict the exemption.

• December 2012 investor subscribes £150,000 for 100,000 shares in a SEIS company. Maximum Income Tax relief for that year of £50,000 is given in the tax year 2012-13 applying the SEIS rate 50%.

• January 2014 the investor receives £20,000 value from the company. The Income Tax relief is reduced by £6,666 (£10,000 x £100,000 / £150,000) by making an assessment.

• January 2018 all the shares are sold for £270,000.

The chargeable gain before any exemption under section 150E(2) is calculated:

Disposal proceeds £270,000

Less cost £150,000

Chargeable gain £120,000

R = Amount to tax relief = £50,000

T Subscription x SEIS rate £75,000

The TCGA92/S150E (5) formula is:

The chargeable gain exemption is restricted to £120,000 x 2/3 = £80,000 leaving a chargeable gain at this point of £40,000.

The TCGA92/S150F (2) formula is

A = Reduction in relief

B = Relief attributable to shares before the reduction

£80,000 x £6,666 = £10,666

£50,000

The exemption is further reduced by the following amount:

The exempt gain becomes £69,334 and the chargeable gain £50,666 (£40,000 + £10,666).