VCM45020 - Seed Enterprise Investment Scheme (SEIS): re-investment relief: how re-investment relief is allowed

TCGA92/SCH5BB/PARA1 (1) to (7)

The relief must be claimed and it is given by treating all or part of the gain in relation to which the claim is made as not being a chargeable gain. There is no requirement that the proceeds of the disposal giving rise to the gain are directly applied to subscribe for the new shares.

The investor can specify an amount of expenditure in the claim up to the amount subscribed for an issue of SEIS shares in the tax year for which he or she claims and obtains SEIS relief, the ‘SEIS expenditure’.

The amount of SEIS expenditure taken into account in the claim cannot exceed

  • the amount of the SEIS expenditure specified in the claim,
  • the amount of the SEIS expenditure that is unused, or
  • that part of the gain which is unmatched.

If the claim is made in respect of a gain accruing in 2012-13, the amount of the gain matched with the SEIS expenditure is treated as not being a chargeable gain.

If the claim is made in respect of a gain accruing in 2013-14 or later years, 50% of the amount of the gain matched with the SEIS expenditure is treated as not being a chargeable gain.

An investor’s SEIS expenditure is unused to the extent that it has not already been used against all or part of a chargeable gain either in a claim to SEIS re-investment relief or in a claim to EIS deferral relief within TCGA92/SCH5B.

The original gain is unmatched to the extent that it has not had any other expenditure set against it in a claim for SEIS re-investment relief or in a claim to EIS deferral relief within TCGA92/SCH5B.

Example 1

In 2012-13 a taxpayer carries out the following transactions:

  • he disposes of a property under an unconditional contract dated 1 May 2012 giving rise to an agreed chargeable gain of £90,000,
  • he subscribes for and is issued with £60,000 worth of shares in a SEIS company on 1 September 2012
  • he subscribes for and is issued with a further £40,000 worth of shares in another SEIS company on 1 December 2012.

The taxpayer can claim a total amount of £90,000 SEIS re-investment relief in respect of this gain and the two share issues. The chargeable gain on the property is reduced to nil. He does not have to claim relief on his acquisition in September in priority to that in December.

Example 2

In 2020-21 a taxpayer carries out the following transactions:

  • he disposes of a property under an unconditional contract dated 1 May 2020 giving rise to an agreed chargeable gain of £90,000,
  • he subscribes for and is issued with £100,000 worth of shares in a SEIS company on 1 September 2020

The taxpayer can claim £45,000 SEIS re-investment relief in respect of the gain and issue of SEIS shares. The chargeable gain on the property is reduced to £45,000.