VCM45080 - Seed Enterprise Investment Scheme (SEIS): re-investment relief: reduction in income tax relief attributable to shares before re-investment relief obtained: example

In 2020-21 an individual investor 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 £150,000
• 1 June 2020 he subscribes £100,000 for 100,000 ordinary shares in a SEIS company.
• 1 December 2020 he receives £20,000 value from the company.

Later he claims SEIS Income Tax relief and CG re-investment relief in respect of his subscription

Based upon the £100,000 subscription the investor would have been eligible for maximum Income Tax relief £50,000 in 2020-21. After reduction in respect of the earlier value received, he obtains relief £40,000.

Of the £100,000 subscribed for the shares the amount that may be matched with the chargeable gain is limited to

100,000 x £40,000 = £80.000

£50,000

The chargeable gain on the property is reduced to £110,000.

Had the transactions been carried out instead in 2012-13, the amount subscribed for SEIS shares that could be matched with the chargeable gain would again be limited to £80,000. After re-investment relief of £80,000 (see VCM45020) the gain on the property would be reduced to £70,000.