Tax relief of up to 78% for investment in small businesses
I don’t believe it! Income tax relief worth 50% of the amount invested in shares issued after 6 April 2012, regardless of the investor’s income?
An additional 28% Capital Gains Tax “holiday” for other capital gains in the 2012/13 tax year, of up to the amount invested?
George Osborne’s new Seed Enterprise Investment Scheme (SEIS), an offshoot of the existing Enterprise Investment Scheme (EIS) and due to start in April 2012, really does seem to offer a total tax relief of up to 78% for investment in small businesses.
As you might expect, there are some [currently draft] conditions:
- The Company must be less than 2 years old and carry on a new business
- There must be less than 25 employees and gross assets of less than £200,000
- The Company can only raise up to £150,000 under SEIS in total (not per year)
- The funds raised must be used within three years and 75% of the money must be used before the Company can raise more money under the EIS scheme
- Investors must own less than 30% of the Company and can be directors (but not employees)
So, for example, an investor who is looking for an interesting project, could invest £10,000 under SEIS, obtain Income Tax relief of £5,000 against their 2012/13 income tax liability and also claim a Capital Gains Tax holiday on £10,000, giving extra relief of £2,800. The net cost is therefore £2,200 and the shares (after three years) can be sold with no CGT on the profit.
Here at Pilot Cottage we are working to create a portfolio of small businesses [clients] with great ideas that are ready for investment. If you are based in the Cotswolds or surrounding areas and interested in finding out more about either EIS or SEIS, whether for your own Company or as a potential investor, you can contact Michael Howes on 01452 759 481 or email michael@pilotcottage.co.uk.
As always, this information is given by way of general guidance only, and no action should be taken solely on the basis of the information contained herein.
No liability is accepted by the firm for any actions taken without seeking appropriate professional advice.