SEIS or EIS shares must be held for a minimum of three years to benefit from income tax relief, and as such should be seen as a long-term investment. If your shares are sold before you have had them for 3 years (for instance, if the company exits), you will have to inform HMRC and repay any income tax relief you have claimed.
You cannot claim relief until the company sends you an SEIS3 or EIS3 form, which it cannot do until it has been trading for at least 4 months.
Your claim can be made on the Self Assessment tax return for the tax year in which the shares were issued. If you have an SEIS3 or EIS3 for a year for which you have not yet received a tax return you can request a change to your PAYE (Pay As You Earn) tax code, or an adjustment to any Self Assessment payment on account due. You will still have to make the claim itself on your tax return when you get it.
Claims can be made up to 5 years after the investment was made.
When you do receive the Certificate, here are a few points to help with claiming:
- Tear off and keep Page 1 Certificate of the SEIS3/EIS3 form
- If your address has changed from the original address in the form - please send a cover letter with the form and updated address
- Complete Pages 3 & 4 of the form - choosing the preferred option: Tax Relief in PAYE coding or Tax Relief for a previous year
- See the further notes on page 4 of the form
- Send to your HMRC Office for completion
As we are legally not able to offer tax advice, if you have any specific questions please contact the team at Small Company Enterprise Centre on 0300 123 1083 or email firstname.lastname@example.org.
There is a 'carry back' facility which allows the all or part of the cost of shares acquired in one tax year, to be treated as though those shares had been acquired in the preceding tax year. Relief is then given against the Income Tax liability of that preceding year rather than against the tax year in which those shares were acquired. This is subject to the overriding limit for relief for each year.
Here are two examples...
Jenny invests £20,000 in the tax year 2012-13 (6 April 2012 to 5 April 2013) in SEIS qualifying shares. The SEIS relief available is £10,000 (£20,000 at 50 percent). Her tax liability for the year before SEIS relief is £15,000 which she can reduce to £5,000 (£15,000 less £10,000) as a result of her investment.
James invests £20,000 in the tax year 2012-13 in SEIS qualifying shares. The relief available is £10,000 as for Example 1. However his tax liability for the year before SEIS relief is £7,500. James can reduce his tax bill to zero as a result of his SEIS investment, but loses the rest of the relief available of £2,500 (£10,000 less £7,500).
For more information, please see the HMRC website.