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The scheme is designed to increase the level of investing in the early development of high growth potential businesses. The scheme is similar to the EIS but focuses on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade.
The main points of the draft legislation are as follows:
• There will be an annual investment limit of £100,000 and cumulative investment limit for companies of £150,000.
• The investee company must have been incorporated no more than two years before the SEIS shares are issued.
• The scheme will only apply to smaller companies with 25 or fewer employees and assets up to £200,000 at the point of investment which are carrying on or preparing to carry on a new business.
• The scheme will provide income tax relief worth 50% of the amount invested to individual investors with a stake of less than 30% in such companies, including directors who invest in their companies.
• The SEIS will apply to subscriptions for shares, using the same definition of eligible shares as EIS.
• There will be an annual investment limit of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under EIS.
• An investment limit of £150,000 for companies to give the greatest degree of flexibility - this is a cumulative limit, not an annual limit.
• An exemption from CGT on gains on shares within the scope of the SEIS.
• A CGT holiday for investments on gains realised from disposals of assets in 2012-13, where the gains are reinvested through the new SEIS in the same year.
• Provisions for the withdrawal of SEIS relief in certain circumstances.
• Strict rules for the investee company to follow to ensure that the majority of money raised is spent on qualifying business activities within a specified time frame.
The use of the SEIS in 2012-13 could therefore result in tax relief of up to 78%. (50% income tax and 28% CGT)
Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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