SEIS / EIS tax relief query - for someone familiar with VCT's

darren72

I've been investing in VCT's for a few years and I know how to claim the tax relief (via my self assessment form). If for example I have invested prior to the end of the 2015/16 tax year I will declare it on this tax return for the relief.

I'm interested in dabbling with SEIS and I believe the way you receive the tax relief is different. You can only claim for each individual company within the portfolio at the time it is invested (rather than the whole lot in one go).

Am I understanding this right ? - Does anyone have any experience on this and can provide clarification ?

Thanks in advance

bowlhead99

When you invest in a qualifying company's issue of qualifying shares, you'll get an SEIS3 form from the investee company. Armed with that form, you can then file a claim (you will need to be able to quote various details from the form, like name of company, amount, name of certifying HMRC office etc). Then you can put a claim in against this years tax bill or last years tax bill (but only within the rules, ie up to £100k of investment actually made in each tax year and only to the extent you actually have tax to pay).

As you need to have a certificate from each purchase, yes you can only claim when you get your certificate (s).

https://www.gov.uk/government/publications/seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-hs393-self-assessment-helpsheet/hs392-seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-2015 might help.


Maybe a bit different to what you're used to - with VCT you just commit to a blind pool of spending and as soon as the money has been subscribed into the VCT you can claim, not really caring whether or not the VCT manager actually deployed the trust's funds into deals yet.

*edit - to clarify further on timing, an example would be:

Investor gives £20k cash to his advisor or discretionary SEIS portfolio manager in Feb 2016.

Funds are deployed into two investee companies in March 2016

Companies start using up those funds and begin trading, and company A gets a SEIS3 cert out to you via your discretionary portfolio manager by summer 2016, company B takes until summer 2017 after being a bit tardy about it and having some delays.

You receive the certificates once they're available and typically claim your reliefs for the two companies in two stages rather than waiting for the second one to come in before you start the first one, otherwise HMRC is sitting on money that could be in your own pocket. But the relief for both is generated for the tax year 2015/16 because the investments were made in March 2016.

darren72

Thanks for the reply - I appreciate the details.

So just to clarify if I purchase a SEIS fund, the fund manager would forward me the certificates for each and every separate company it is split between ?

Thanks again

bowlhead99

Yes, and see edit above which I did before I saw you'd replied.

That's one of the reasons the minimum investments on EISs are usually bigger than with a VCT. With a VCT you just own a unit in a fund and buying it as a new issue qualifies for relief. With an EIS discretionary manager the guy is literally putting £2.4k each into ten companies for your £25k (and keeping an initial fee for himself which you can't get relief on because it doesn't go into qualifying investments into companies), and chasing down the proofs for your ten shareholdings to help you get your relief.

darren72

Thanks again - that makes sense.

This is one of the reasons I have been previously put off investing in the EIS/SEIS.

Have you done this yoursef, and are companies generally quite slow in getting the required paperwork back to the investor ?

Thanks again

bowlhead99

I've done VCT but not EIS, but have spoken to those doing it. As an example, the literature/brochure for Octopus's EIS program (they do VCTs and a couple of EIS discretionary management offerings), mentions you could perhaps wait 12-18 months for your EIS3 certificates in some cases, though they endeavour to do it quicker. It's in their interest to do it as quick as possible because then you have more money to invest with therm again! The brochure also gives examples of a newly capitalised company needing to have 4 months trading before it can start the ball rolling for certificates.

Getting an SEIS3 cert is probably not any quicker than getting an EIS3 cert. And I only use octopus as an example of something available online, not a recommendation and I have no connection, I just looked at it previously.

Clearly the message is, don't bank on having that "cashback" available quickly to catch this year's VCT or pension or ISA window, for example.

TheTracker

I've done some EIS on crowdfunding platforms. The certificate usually takes a couple of months after legal is finished for established companies. It's usually a topic on the discussion forum attached to the investment. Of course you can carry back the tax relief to previous years but often people already have previous year tax due that they want to offset now. Setting off yesterday's today not today's tomorrow. I also invested in a local EIS scheme and the certificate was even quicker to arrive.

darren72

I've been looking into this further and belief that I can also claim back capital gains tax that I paid in the tax year 2013/14 if I reinvest the gains into a SEIS. However, on reading the HMRC information it initially sounds as though you can only claim back one year, but later on it says you can claim back from 2012/13 onwards.

Would someone be able to confirm ??

Here is the information from the HMRC website:

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https://www.gov.uk/guidance/seed-enterprise-investment-scheme-background

Capital Gains Tax: reinvestment relief

This relief was originally only available for the 2012 to 2013 tax year but has been extended to 2013 to 2014 at half the rate. If you sold an asset and reinvested all or part of the amount of the gain in shares which also qualify for SEIS income tax relief, the amount reinvested may be exempted from Capital Gains Tax. If you sold an asset that would give rise to a chargeable gain in 2013 to 2014, and reinvest all or part of the amount of the gain in shares which also qualify for SEIS income tax relief, half of the amount reinvested may be exempted from Capital Gains Tax. Capital gains re-investment relief is subject to the £100,000 annual investment limit which applies for income tax relief. Thus for 2012 to 2013 gains of up to £100,000 may be exempted and for 2013 to 2014 up to £50,000. The latest date for making a claim for 2012 to 2013 is 31 January 2019 and, for 2013 to 2014, 31 January 2020.

The asset does not have to be disposed of first, the investment in SEIS shares can take place before the disposal of the asset, providing that both the disposal and investment take place in the same year.

If you make use of the ‘carry-back’ facility for the purposes of SEIS income tax relief note that any claim to reinvestment relief must match the year in which the shares are then treated as issued. If you are issued SEIS shares in 2013 to 2014, you may want to claim SEIS income tax relief as if all or some had been issued instead in 2012 to 2013. If you do so, the shares treated as issued in 2012 to 2013 are also treated as issued in 2012 to 2013 for the purposes of re-investment relief and you cannot claim re-investment relief on gains made in 2013 to 2014 in respect of those shares.

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Thanks in advance