The taxman’s new Seed Enterprise Investment Scheme (SEIS) applies from 6 April 2012 and offers 50% income tax relief to “individuals investing up to £100,000 per tax year in qualifying companies”, says Carl Bayley in Business Tax Saver. This is not dependent on the individual’s marginal tax rate so most investors will simply see their tax bill halved.
Better yet, “where a capital gain arising in 2012/2013 is reinvested in SEIS shares during the same tax year, it will be exempted from capital gains tax”. This means investors could get up to 78% tax relief in total, leaving just 22% of your investment exposed to the inherent risk of investing in a small firm.
The scheme is targeted at start-ups and “there is a cumulative limit of £150,000 for the total amount” raised by a firm under the scheme. Investors can be directors but not employees. They can’t hold, “nor be entitled to acquire, an interest of more than 30%” in the firm’s share capital. Despite other restrictions, the tax relief makes SEISs worth a look. But act now, says Tax Tips & Relief, while the tax breaks are generous.