HM Treasury sets out draft SEIS legislation in the Finance Act 2012
We reported last week on the Chancellor’s announcement in his Autumn Statement of a new tax-advantaged scheme to encourage investment in start-up business, to be called the “Seed Enterprise Investment Scheme” (the SEIS). HM Treasury has today published the draft Finance Bill 2012 containing details of the SEIS and its operation. The SEIS will, in the Treasury’s description:
“- apply to smaller companies, those with 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business;
- give income tax relief worth 50 per cent of the amount invested to individual investors with a stake of less than 30 per cent in such companies, including directors who invest in their companies;
- apply to subscriptions for shares, using the same definition of eligible shares as EIS (which it is proposed will be widened in Finance Bill 2012);
- apply to an annual amount of investment of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under EIS;
- provide for relief within an overall tax favoured investment limit of £150,000 for the company. To give the greatest degree of flexibility, this will be a cumulative limit, not an annual limit;
- provide for an exemption from CGT on gains on shares within the scope of the SEIS; and,
- provide for an exemption from CGT on gains realised from disposals of assets in 2012-13, where the gains are reinvested through the new SEIS in the same year.”
The detailed draft legislation is contained in the draft Finance Bill (at page 11 of the pdf onwards) and at pages A3 to A5 of the Treasury’s Overview document. Other aspects of these draft SEIS rules are that:
- SEIS money must be utilised within three years. A company may raise Enterprise Investment Scheme and Venture Capital Trust investment once 75 per cent. of the SEIS money is utilised.
- Tax relief will only be available for investments via equity investments.
- A claim for SEIS relief in respect of shares issues by a company in any tax year may not be made until at least 70% of the money raised by the issue of shares has been spent by the company.
As part of its finalisation of the SEIS details, the Treasury has also published a response to the consultation on tax-advantaged venture capital schemes that it launched in July 2011 (see this post). The response contains various comments from market practitioners and angel investors on how best to construct an SEIS-type scheme, with many of those comments stressing the need for simplicity and for all holders of equity to be treated in the same way (i.e. no “special rights” that would lead to a divergence of interest between entrepreneur and investor).
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