Act now to make use of the tax benefits of Seed EIS
The Seed Enterprise Investment Scheme (EIS) offers a form of reinvestment relief for investors who subscribe for shares in small start-up companies. For 2013/14, the maximum qualifying investment is £100,000. Up to one half of the amount invested may be offset against a capital gain made in the year to reduce the capital gains tax payable. This is a permanent tax saving provided that the Seed EIS shares are retained for at least three years.
Alternatively, in the case of an investment made in 2013/14, some or all of the relief may be carried back to 2012/13, and set against gains in that year. The whole of the sum invested (and not just one half) may be set against those gains, subject to the cap of £100,000. The investment in Seed EIS shares also attracts tax relief at 50% of the sum invested. This rate of tax relief is given regardless of the rate of income tax paid by the investor, subject to tax relief being capped at the total tax paid in the year. The carry back facility outlined above applies to income tax as well as to CGT.
A number of professionally managed Seed EIS investment funds exist which invest in a broad range of Seed EIS companies on behalf of investors, the tax benefits of such investments are available to any UK tax payer.
The cut-off date for Seed EIS is 5th April 2014 so it is important to take swift action.