SEIS through a limited company

[Tyndall]

Can I take advantage of SEIS in a startup but investing cash via my existing Ltd company rather than personally?

If so how does the tax relief work? Everything I've read seems to relate to a 50% reduction in personal income tax rather than discussing via a company.

[isleofthorns]

wouldn't have thought so... it's a personal relief

obviously, you'll have to pay tax to take money out from the company into your own account, the impact of which could be mitigated by the relief you'll then receive personally.

[stub101]

I’m in no way giving formal advice but S/EIS tax relief is exclusively available to individuals to offset their personal tax bill.

Investments into startups can be made by limited company but are not S/EIS eligible. Investments via Ltd Co will reduce a businesses profit and therefore corporation tax liability so can (increasingly) be very useful.

As someone who deals with angel investments and S/EIS I am interestingly seeing more and more investments via Ltd CO’s/PSC’s, either exclusively or alongside personal investments which would likely benefit form S/EIS tax relief.

[Seventy-Eight]

stub101 said:

I’m in no way giving formal advice but S/EIS tax relief is exclusively available to individuals to offset their personal tax bill.

Investments into startups can be made by limited company but are not S/EIS eligible. Investments via Ltd Co will reduce a businesses profit and therefore corporation tax liability so can (increasingly) be very useful.

As someone who deals with angel investments and S/EIS I am interestingly seeing more and more investments via Ltd CO’s/PSC’s, either exclusively or alongside personal investments which would likely benefit form S/EIS tax relief.

I don't see how a company can reduce its CT liability by investing in another company?

[Tyndall]

Presumably as it reduces profit therefore CT payable on said profit?

[stub101]

I’m not an accountant and haven’t used this method myself but as mentioned I’ve had a few people use it and each have referenced reduced CT. It will of course depend on lots of other factors.

Id be very interested to hear an accountants ‘top of head’ viewpoint.

[NFT]

stub101 said:

I’m not an accountant and haven’t used this method myself but as mentioned I’ve had a few people use it and each have referenced reduced CT. It will of course depend on lots of other factors.

Id be very interested to hear an accountants ‘top of head’ viewpoint.

Me too, as I believe the company will be investing and not any controlling/owning party unless money removed becoming subject to tax?

[Seventy-Eight]

I can't see how a company investing in the shares of another company can reduce its CT bill. As far as I know the tax breaks under EIS are only applicable to individuals investing. I may be wrong though!

[Eric Mc]

Seventy-Eight said:

I can't see how a company investing in the shares of another company can reduce its CT bill. As far as I know the tax breaks under EIS are only applicable to individuals investing. I may be wrong though!

Same here. SEIS is aimed at reducing an investor's personal Income Tax bill. At least, that is what I have always understood from the wording of the legislation.

[Tyndall]

I read that as reducing CT bill by buying shares/investing in another company, not by buying SEIS shares.

[Seventy-Eight]

Tyndall said:

I read that as reducing CT bill by buying shares/investing in another company, not by buying SEIS shares.

Purchasing shares will not reduce a company's profit. Investments sit on the balance sheet.

[Eric Mc]

Exactly - it's an investment in an asset, not a business cost - so not eligible for offset against business profits.

[Tyndall]

Understood, thank you. So AIUI the best way would be to withdraw the cash as salary then take advantage of the SEIS tax break.

[ParkerTalbot]

If SEIS shares are held for 3 years then gifted to a child, at the point of sale in the future is the CGT relief attached to the shares or the previous individual who purchased them.

For example:

- Parents own SEIS shares they bought over 3 years ago (I believe they have to be held this long)
- Give shares to child
- Child sells shares after 2 years.

Does child have to pay CGT?

[ParkerTalbot]

Anyone know?

[Eric Mc]

ParkerTalbot said:

Anyone know?

Without checking the detailed legislation I would guess that CGT might be payable.

At the point you gave the asset away, you might be subject to CGT based on the original purchase price versus the Market Value of the asset at the time you gifted it.

The recipient of the gift will be subject to CGT when they sell it. Their gain will be calculated by comparing the sale proceeds on the disposal versus the market value at the date of acquisition.

If these gains are lower than the personal Capital Gains threshold then no tax will be payable. Note that the CGT threshold have been serious reduced (was £12,300 - now £6,000).

[ParkerTalbot]

Eric Mc said:

Without checking the detailed legislation I would guess that CGT might be payable.

At the point you gave the asset away, you might be subject to CGT based on the original purchase price versus the Market Value of the asset at the time you gifted it.

The recipient of the gift will be subject to CGT when they sell it. Their gain will be calculated by comparing the sale proceeds on the disposal versus the market value at the date of acquisition.

If these gains are lower than the personal Capital Gains threshold then no tax will be payable. Note that the CGT threshold have been serious reduced (was £12,300 - now £6,000).

Thanks Eric, so despite SEIS shares being CGT free, you would say this relief disappears at the moment of them being given to a 3rd party?

[Eric Mc]

I'm not au fait with the specific rules for gifting SEIS shares.

[NickZ24]

ParkerTalbot said:

Anyone know?

Here it comes:

gov.uk said:

How the scheme works

The scheme:

offers tax reliefs to individual investors who buy new shares in your company
helps your company to raise money when it’s starting to trade

You can receive a maximum of £250,000 through Seed Enterprise Investment Scheme. This will:

include any other de minimis state aid received in the 3 years, up to and including the date of the investment
count towards any limits for later investments through other venture capital schemes

There are various rules you must follow so your investors can claim and keep the Seed Enterprise Investment Scheme tax reliefs relating to their shares.

Tax reliefs will be withheld, or withdrawn, from your investors if you do not follow the rules for at least 3 years after the investment is made.

Source:
https://www.gov.uk/guidance/venture-capital-scheme...

[Eric Mc]

Yes - INCOME tax relief for individuals.

The question was whether a limited company could obtain CORPORATION tax relief.