SEIS

HMRC has revealed that the Government will extend capital gains tax (CGT) relief for investors in early stage enterprises for a second year.

The extension looks set to boost the numbers of those reaping the rewards of the Seed Enterprise Investment Scheme (SEIS) - launched by the Chancellor in Budget 2012 - and designed to help small, early-stage companies raise equity finance by offering a range of tax reliefs to individual investors buying new shares in the companies.

The scheme complements the existing Enterprise Investment Scheme (EIS) which continues to offer tax reliefs to investors in higher-risk small companies. It also aims to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate than that offered by the existing EIS.

Kathryn Robertson, HMRC’s senior policy adviser on venture capital schemes, announced the move during a presentation to investors at the Google Campus in East London, the FT reports.

Robertson said that CGT can effectively be sidestepped on funds invested in companies before April next year, through a “carrying back” process, although there would be a limit on the investment levels that can be carried back.

She said that even when the CGT relief does expire, investors can still claim 50% income tax relief on early stage investments as laws underpinning the scheme will continue until 2017.

SEIS applies for shares issued on or after 6 April 2012. The rules have been designed to mirror those of EIS as it is anticipated that companies may want to go on to use EIS after an initial investment under SEIS.