ACCA ATX ^UK Syllabus A2. Chargeable gains - SEIS Reinvestment Relief - Notes ^{2 / 4}

Investing in SEIS shares

If an individual disposes of any chargeable asset and reinvests in unquoted shares in a qualifying Seed Enterprise Investment company it is possible to exempt some (or all) of the gain arising on the asset by claiming SEIS Reinvestment Relief.

• Conditions

  To qualify for SEIS reinvestment relief, the individual must be resident in the UK when the gain arises and the reinvestment is made.
   
  The reinvestment must be made in the same tax year as the disposal against which relief is claimed. 

  Any gain exempted under SEIS reinvestment relief will become chargeable if there is a claw back of SEIS income tax relief. This includes the following events 

  1) The investor disposes of the shares within 3 years. 
  2) The investor becomes non-resident within 3 years of the issue of the shares. 
  3) The company in which the shares were purchased ceases to be a qualifying company.

Maximum SEIS Relief

Lower of: 

(1) 50% x the capital gain 
(2) 50% x the cost of the shares purchased in the SEIS (upper limit on the cost of the shares is £200,000) 
(3) Some smaller amount

Illustration

Shawna sold a holiday cottage in August 2024 for £75,000 realising a capital gain of £35,000. 

Shawna subscribes for qualifying SEIS shares in Victoria Ltd (a trading company), in March 2025 costing £60,000. 

She has no other capital transactions in 2024/25 but Shawna has £18,100 of capital losses brought forward at 6 April 2024. 

In 2025/26 Shawna sells the SEIS shares for £70,000. 

Assume Shawna is a higher rate taxpayer. 

What amount of SEIS relief is available to Shawna?

• Solution

  Shawna should claim SEIS reinvestment relief on £13,900 of her capital gain as this ensures that she gets early relief for her capital loss brought forward and ensures her annual exempt amount is preserved.

  Capital gain £35,000
  Less:
  SEIS Relief (£13,900)
  Chargeable gain £21,100
  Less:
  Capital loss (£18,100)
  Less:
  A/E (£3,000)
  Taxable gain £Nil

• Disposal of EIS Shares

  Shawna is disposing of all her SEIS shares within 3 years and therefore her income tax relief is withdrawn and the capital gain of £13,900 on the cottage is now chargeable in 2025/26.

  Shawna must also pay CGT on the chargeable gain realised on the disposal of the shares. 

  The SEIS shares are only exempt from CGT on capital gains if the shares are kept for at least 3 years.