Investors of the Seed Enterprise Investment Scheme (SEIS) investors should begin organizing their papers in order to claim the scheme’s tax reliefs.
The tax year ends on April 6, so investors need to be ready to claim back their tax.
Presumably the SEIS company directors have already gained approval allowing them to participate in the scheme and can show a SEIS1 form from the HMRC to prove the company and shares meet the qualifying criteria for tax relief.
This qualification includes a declaration that the shares are ordinary shares without any special rights and the company is involved in readying to trade or trading in a suitable business sector.
It is not possible to hand in a SEIS1 form unless the company has been trading for 4 months. If the company is not trading, at least 70% of the total amount of cash generated from the shares must be spent.
Investors will want to make sure they keep on top of the firm’s progress to make sure these rules are met so they can claim their tax relief.
Submitting the forms
Once HM Revenue & Customs (HMRC) has reviewed that the basic SEIS conditions have been met by the company, SEIS3 forms are released to the listed directors. Essentially, the SEIS3 forms confirm the value of the amount invested into the SEIS company and allows the investor to claim their tax reliefs.
Income tax relief can be gained in a number of different ways:
- A self-assessment tax return can be submitted for the year in which you invested in SEIS and your shares were given to you. You can also claim the tax relief for the year before if you are permitted
- For those who do not have a tax return it is possible to request a PAYE coding adjustment to which will allow you to repay relief through a number of instalments for the remainder of the tax year
- If you have not paid off your total income tax, you can offset the relief against the remaining balance
For any way that income tax relief is claimed, all SEIS investors may get 50% of their investment back as income tax reduction regardless of the rate that they pay.
All those who have invested in a SEIS company and have applied for a PAYE coding adjustment must still submit a tax return that lists their investment.
The tax relief is valid for 5 years post-SEIS investment after the 31st of January of the following year.
All claims for CGT or for loss relief must be made on the relevant pages of a self-assessment tax return.
The Small Company Enterprise Centre (Admin Team) is the HMRC department handling SEIS tax relief claims.
The team can be contacted at Medvale House, Mote Road, Maidstone, Kent ME15 6AF (Telephone: 03000 588907)