In this article, find out how an SEIS investment can save you money on your Capital Gains Tax via Reinvestment Relief.
The Seed Enterprise Investment Scheme (SEIS) allows you to invest money in a young business and claim tax relief at the same time. This tax relief can come via Income Tax, Capital Gains Tax and Reinvestment.
Today we’re going to talk about Reinvestment Relief.
What Is Reinvestment Relief?
There are two ways that SEIS can save you money on Capital Gains tax. “Disposal Relief” is what most people think of when they talk about CGT. This is tax relief when you sell your shares and realise a profit.
To qualify for Reinvestment Relief, you sell your shares (at a profit) and then reinvest the proceeds in a company on which you get SEIS Income Tax Relief.
You can nominate up to half of your profits to be exempt from CGT. And you can get this relief even if you already get Income Tax relief on the shares.
What’s The Catch?
No catch really, other than a couple of restrictions in terms of the absolute amount you can claim.
You can’t claim more than half of the total amount you’re already claiming Income Tax relief on. And that Income tax figure is capped at £100,000 (at the time of writing). So you can’t claim more than £50,000 Reinvestment Relief.
You can, of course, claim less than the maximum amount.
The HMRC page on SEIS Tax Relief has all the details, including a handy worked example.
How Do I Claim?
If you’re planning to claim the tax relief as part of your self-assessment, you can use the SEIS3 claim form (you’ll have got this from the company when you bought the shares). Attach it to the Capital Gains summary form. As the HMRC page explains:
- Put the 3-letter code ‘OTH’ in box 28 on page CG 2
- Provide details of the claim in the ‘Any other information’ box, box 54, or in your computation
- Enter in box 40 the total of all your gains made on the disposal of assets in the year to 5 April 2019 which are claimed to be exempt because of reinvestment into shares issued to you, or treated as issued to you, in that year by one or more SEIS companies
- Enter the total of the amounts claimed to be exempt, not the full amount of the gains
If you’re planning to claim after you’ve sent your tax return, use the SEIS3 claim form.
Key Business Consultants was founded as an SEIS specialist accounting firm. So if you’d like to get some advice from a team of chartered accountants who are experts in this area, please get in touch.