SEIS is a scheme that works by offering tax relief for investors buying new shares in the business. The incentives are as follows:
- Potential investors can claim 50% of their investment back as income tax relief. For example, if an investor bought shares for £20,000, they would be able to claim back £10,000 from income tax.
- If the investor sells the shares after having owned them for over three years, they will be exempt from capital gains tax.
- If the investor has owned the shares for over 2 years, the shares will not be subject to inheritance tax.
- If an investor makes a loss on their investment, they can offset this against income tax. The relief they can get is equivalent to the income tax they pay. For example, if an investor pays 45% income tax, they can get 45% of investment loss back. Therefore, if an investment of £10,000 reduces to £5,000, an investor in this tax bracket will be able to claim £2,250 off their income tax.
- Investors can get capital gains reinvestment relief. This means they can claim up to 50% of capital gains tax already paid for other non-SEIS investments, if they reinvest this money in an SEIS.