You need to have received an S/EIS certificate showing that your investment in a qualifying company has been approved by HMRC before you can make a claim for tax relief. In some cases there might be a delay in receiving your certificate as a company must have been trading for more than four months, or confirm that they have spent at least 70% of the funds raised.
Once you have received the S/EIS3 certificate you will need to claim in one of two ways:
- If you are submitting your own tax filings, you don't need to send the EIS certificate to HMRC along with your return - you will only need to send it if they request it
- If you aren't submitting your own tax filing, you need to complete pages 3&4 and send to the office that deals with your PAYE. You can find this information on any previous correspondence you may have received from HMRC or your employer should also hold this information. Please note, we do not hold this information for investors.
If you are in any doubt as to where to send your S/EIS certificate to please contact HMRC directly who will be able to provide you with the correct details.
There are some rules that you should be aware of when it comes to claiming your tax relief:
Share “Termination date”: 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. The date you must retain your share until is shown in as the share termination date on your S/EIS certificate. If your shares are sold before you have held them for 3 years , you will have to inform HMRC and repay any income tax relief you have claimed.
Investor tax reference: Not all investors will have an Investor tax reference number, please provide your National Insurance Number instead to allow HMRC to link your claim for tax relief to your income tax.
Tax relief for a different year – your choices: HMRC outline that there is a possibility to back date your claim for tax relief to previous tax years. There is a 'carry back' facility which allows 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).
Please visit the HMRC website for more information regarding the process of claiming tax relief, which can be found here.