HMRC has revealed that the Government will extend capital gains tax (CGT) relief for investors in early stage enterprises for a second year. The initial Seed Enterprise Investment Scheme (SEIS) rules only covered gains realised in 2012/13 but now investors who will realise taxable gains in 2013/14 and invest in an SEIS company will have no tax to pay.
It is only the gain that has to be invested and not the actual proceeds. So if you sell an asset for say £100,000 and realises a chargeable gain (before exemption) of £40,000 then you only have to re-invest £40,000 and not the total proceeds of £100,000.
It is worth noting that even when the CGT relief expires, you can still claim 50% income tax relief on early stage investments and this will continue until 2017.
It is hoped that this extension will provide a boost to early-stage companies looking to raise equity finance. SEIS applies for shares issued on or after 6 April 2012. The rules have been designed to mirror those of EIS as it is anticipated that companies may want to go on to use EIS after an initial investment under SEIS. Should you have any queries regarding EIS or SEIS please don’t hesitate to contact Karen Best on 01656 867167.