VCM45060 | Seed Enterprise Investment Scheme (SEIS): re-investment relief: income tax relief restricted: example

In 2024-25 an individual investor carries out the following transactions:

• He disposes of a property under an unconditional contract dated 1 May 2024 giving rise to an agreed chargeable gain of £130,000.

• He subscribes £80,000 for and is issued with shares in a SEIS company A Ltd on 1 September 2024.

• He subscribes £240,000 for and is issued with further shares in another SEIS company B Ltd on 1 December 2024.

He claims full SEIS Income Tax Relief in respect both share issues. He also makes claims for re-investment relief in respect of the amounts subscribed for the shares in both A Ltd and B Ltd.

Section 257AB(2)(b) ITA07 limits the amount on which the investor’s SEIS Income Tax relief is based to £200,000.

Of the £80,000 subscribed for the shares in A Ltd the amount that can be matched with the chargeable gain is limited to

80,000 x £200,000 = £50,000

320,000

Of the £240,000 subscribed for the shares in B Ltd the amount that can be matched with the chargeable gain is limited to

240,000 x £200,000 = £150,000

320,000

The investor can claim £100,000 SEIS re-investment relief in respect of this gain and the two share issues. The chargeable gain on the property is reduced to 30,000.

Had the transactions been carried out instead in 2022-23, the amounts subscribed for shares that could be matched with the chargeable gain would be limited to a total of £100,000. After re-investment relief of £50,000 (see VCM45020) the gain on the property would be reduced to £80,000.