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Tax relief due on share subscriptions

For many investors into private companies the reliefs available under the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) substantially increase the attractiveness of such, inevitably higher risk investments.

By way of summary the current reliefs and limits potentially available are:

EIS

  • Income tax relief at 30% on the amount subscribed
  • An exemption from capital gains tax on exit after 3 years
  • These reliefs are subject to a £1 million cap on investment
  • The ability to defer tax on other gains until such time as the EIS shares are disposed of. This relief is unlimited.

SEIS

  • Income tax relief at 50% on the amount subscribed
  • An exemption from capital gains tax on exit after 3 years
  • Gains deferred against SEIS shares in 2012/13 also qualify for an exemption
  • These reliefs are subject to a £150,000 cap on investment
  • For gains deferred against shares after April 2013 the exemption is restricted to 50%.

The reliefs are complicated and many requirements have to be met with regard to both the company and the investor. However, the relief can make a significant difference to the cost of investment:

Given the reliefs potentially available it may well be worth looking at the opportunities for qualification before embarking on fundraising or investment.

 

 

Date: 8th April, 2013
Author: David Mansell

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