VCM45090 - Seed Enterprise Investment Scheme (SEIS): re-investment relief: relief reduced or withdrawn
TCGA92/SCH5BB/PARA5
To obtain re-investment relief the investor must claim and obtain SEIS relief in respect of an issue of shares. Chapter 6 Part 5A ITA07 contains provisions which withdraw or reduce the Income Tax relief if certain events occur before the third anniversary of date of the share issue. Where the Income Tax relief is withdrawn or reduced, there is a corresponding removal or reduction of re-investment relief. The removal or reduction of the relief is effected by deeming a chargeable gain to accrue to the individual in the tax year in which the shares were issued on a disposal made in that tax year.
Where in respect of shares issued to an individual
- SEIS relief is attributable to the shares,
- SEIS re-investment relief is also attributable to the shares, and
- the SEIS relief attributable to the shares is withdrawn
a chargeable gain is treated as accruing in the tax year in which the shares were issued. The amount of the gain is the amount of the SEIS re-investment relief attributable to the shares immediately before the withdrawal of the Income Tax relief. No re-investment relief then remains attributable to the shares.
- the SEIS relief attributable to the shares is reduced
a chargeable gain is treated as accruing in the tax year in which the shares were issued. The re-investment relief is reduced in the same proportion as the Income Tax relief and the amount of the gain is a fraction of the SEIS re-investment relief attributable to the shares immediately before the reduction. The fraction is:
R1 - R2
R1
where
R1 = the total amount of the SEIS relief attributable to the shares immediately before the reduction
R2 = the total amount of the SEIS relief attributable to the shares immediately after the reduction
The amount of re-investment relief remaining attributable to the shares is reduced by the amount of the gain brought back into charge.
This is illustrated by examples at VCM45100.