SEIS Investment
Discussion
Trying to check whether my understanding is correct please (numbers made up for the example):
I have a capital gain of £100k to pay this financial year on top of the £30k of income tax. This is the first year I've had a capital gain on an investment outside of an ISA (and it's not shares).
If I invest £10k in SEIS (a specific company, not a random punt), I reduce my income tax by £5k (50%) and since it's reinvestment of a capital gain, I can also claim reinvestment relief of £10k x 50% x 24% (CGT rate), i.e. another £1.2k.
If the investment goes to zero (worst case, unless it just trickles along doing very little), I can claim 40% tax back on the £5k invested (post income tax relief) so my maximum loss on a £10k investment is £1.8k, but if it goes up by 5x, my £50k is tax free?
Have I missed anything?
I have a capital gain of £100k to pay this financial year on top of the £30k of income tax. This is the first year I've had a capital gain on an investment outside of an ISA (and it's not shares).
If I invest £10k in SEIS (a specific company, not a random punt), I reduce my income tax by £5k (50%) and since it's reinvestment of a capital gain, I can also claim reinvestment relief of £10k x 50% x 24% (CGT rate), i.e. another £1.2k.
If the investment goes to zero (worst case, unless it just trickles along doing very little), I can claim 40% tax back on the £5k invested (post income tax relief) so my maximum loss on a £10k investment is £1.8k, but if it goes up by 5x, my £50k is tax free?
Have I missed anything?
Edited by AyBee on Wednesday 19th March 23:50
I’m a fan of EIS ,KIEIS and VCT but seed is for me just too much of a gamble.
The tax reliefs available in comparison seem to support this but as with the above I have always wanted to look first at the quality of the company rather than simply invest for the tax relief.
I assume that failure within 3 years of the company mean that as with the above EIS , any tax relief claimed needs repaying ?
Your numbers seem correct though to how I understand it.
Best of luck.
The tax reliefs available in comparison seem to support this but as with the above I have always wanted to look first at the quality of the company rather than simply invest for the tax relief.
I assume that failure within 3 years of the company mean that as with the above EIS , any tax relief claimed needs repaying ?
Your numbers seem correct though to how I understand it.
Best of luck.
alscar said:
I’m a fan of EIS ,KIEIS and VCT but seed is for me just too much of a gamble.
The tax reliefs available in comparison seem to support this but as with the above I have always wanted to look first at the quality of the company rather than simply invest for the tax relief.
I assume that failure within 3 years of the company mean that as with the above EIS , any tax relief claimed needs repaying ?
Your numbers seem correct though to how I understand it.
Best of luck.
It's only really because I know the founder and the industry that I'm considering it, alongside the beneficial tax treatment. From my reading, it's gains or sales within 3 years that would lose you your tax relief, not failure?The tax reliefs available in comparison seem to support this but as with the above I have always wanted to look first at the quality of the company rather than simply invest for the tax relief.
I assume that failure within 3 years of the company mean that as with the above EIS , any tax relief claimed needs repaying ?
Your numbers seem correct though to how I understand it.
Best of luck.
AyBee said:
It's only really because I know the founder and the industry that I'm considering it, alongside the beneficial tax treatment. From my reading, it's gains or sales within 3 years that would lose you your tax relief, not failure?
Yes I had assumed that you might have better information than average. Definitely with EIS failure meant repayment within that first 3 years ( happened to me on 4 investments ) was necessary but I don’t know enough about SEIS to say for sure.
Definitely worth checking.
Hmm. This link: https://www.gannons.co.uk/insights/seis-and-eis-re... seems to imply that if you sell within 3 years you lose the relief but if it's a genuine insolvency failure, tax relief should not be withdrawn. That's for SEIS and EIS.
AyBee said:
Hmm. This link: https://www.gannons.co.uk/insights/seis-and-eis-re... seems to imply that if you sell within 3 years you lose the relief but if it's a genuine insolvency failure, tax relief should not be withdrawn. That's for SEIS and EIS.
From that link. If the shares cease to qualify for EIS or SEIS income tax relief already claimed by the investors will be repayable.
In the 4 occasions investments have gone t*ts up the VC company I invested through wrote to me and said I needed to repay the 30% income tax relief I had previously received.
They supplied a template letter but I just gave it all to my accountant to sort.
Sheepshanks said:
The CGT relief is just a deferral, isn't it - doesn't it have to be paid eventually?
This is quite a good link. https://www.myersclark.co.uk/capital-gains-tax-def...
My wife owned a fair few shares in the company I worked for which when sold enabled her to invest in some solar power companies in Spain which got her the relief needed to “ reduce “her CGT bill but also as spouse then gave them to me for “ use “.
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