VCM45100 - Seed Enterprise Investment Scheme (SEIS): re-investment relief: relief reduced or withdrawn: examples
Example 1
An investor subscribes £50,000 for SEIS shares that are issued to him in 2020-21. He claims and obtains SEIS Income Tax relief in respect of the shares. He also claims in respect of the share subscription re-investment relief in relation to a chargeable gain of £40,000 from the disposal of a property in 2020-21. The chargeable gain is reduced to £20,000 (see VCM45020). Two years later he sells all the shares at undervalue to a friend.
The disposal of the shares is not by way of a bargain made at arm’s length and all the SEIS relief is withdrawn. The whole of the re-investment relief is also withdrawn and a gain £20,000 becomes assessable for 2020-21.
Example 2
An investor subscribes £30,000 for SEIS shares that are issued to her in 2018-19. She claims and obtains SEIS Income Tax relief £15,000. She also claims in respect of the share subscription re investment relief in relation to a chargeable gain of £24,000 from the disposal of land in 2018-19. The chargeable gain is reduced to £12,000. Two years later, in 2020-21, she sells the shares at arm’s length for £20,000.
On the sale of the shares £10,000 of the SEIS Income Tax relief is withdrawn. This is two thirds of amount attributable to the shares immediately before the sale and the re-investment relief is reduced in the same proportion:
R1 - R2 x 12,000 = 15,000 - 5,000 x 12,000 = 8,000
R1 15,000
A gain £8,000 becomes assessable for 2020-21.
A loss accrues on the disposal of the shares in 2020-21. The loss is restricted by the Income Tax relief remaining attributable to shares, see VCM40100.
Example 3
An investor subscribes £50,000 for SEIS shares that are issued to him in 2012-13. He claims and obtains SEIS Income Tax relief in respect of the shares. He also claims in respect of the share subscription re-investment relief in relation to a chargeable gain of £40,000 from the disposal of a property in 2012-13. The chargeable gain is reduced to nil. Two years later he sells all the shares at undervalue to a friend.
The disposal of the shares is not by way of a bargain made at arm’s length and all the SEIS relief is withdrawn. The whole of the re-investment relief is also withdrawn and a gain £40,000 becomes assessable for 2012-13.