Background

Based upon consultations undertaken since Budget 2011, in his Autumn Statement on 29 November 2011, the Chancellor announced that the Government will introduce a new Seed Enterprise Investment Scheme ("SEIS") to encourage investment in new start-up companies.

SEIS: New Income Tax Relief

Starting in tax year 2012-13 (from 6 April 2012), the SEIS will provide income tax relief of 50 per cent for individuals who invest in shares in qualifying companies. In his speech, the Chancellor indicated that tax relief at 50 per cent will be given whether or not the individual concerned pays 50 per cent income tax.

The proposed maximum limits on investment under the SEIS will be as follows:

  • Each individual will have an annual investment limit of £100,000 and
  • Each company will have a cumulative investment limit of £150,000.

SEIS: Temporary Capital Gains Tax Relief

In addition to the SEIS income tax relief, for the 2012-13 tax year only, the Government will also offer an SEIS capital gains tax relief for investments that are made into the new scheme.

The SEIS capital gains tax relief will comprise an exemption from capital gains tax in respect of capital gains realised on assets disposed of in the 2012-13 tax year if invested through SEIS in that same tax year.

Future Developments

The draft Finance Bill 2012 is due to be published on 6 December 2012 and it is hoped that further details of the SEIS may then be clarified.

Whilst the new SEIS is of course welcome, the cumulative investment limit of £150,000 per company will often provide insufficient start up funding and seems unduly restrictive. Hopefully, therefore, the Government may be persuaded to increase the company limit significantly, perhaps to £500,000 or £1 million.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.