It’s time for Seed Enterprise Investment Scheme (SEIS) investors to tidy up their paperwork so they can claim their generous tax reliefs.
With lots of information available about investing in a SEIS, how and when to reclaim income tax relief on the investment is often missed out.
The first step in claiming tax relief is the directors of the SEIS company gaining approval to join the scheme by submitting a Form SEIS1 to HM Revenue & Customs (HMRC).
The paperwork is a declaration that the shares and company meet SEIS qualifying criteria, says specialist investment web site SEIS.org.uk
Investors need to keep on top of the directors about submitting the SEIS1 because no tax relief can be claimed until the document has been processed by HMRC.
Three ways to claim tax relief
According to the website, “Directors cannot submit a SEIS1 until a company has traded for at least four months or, if not trading, until 70% of cash raised from the share issue has been spent.”
When HMRC agrees the company meets SEIS conditions, HMRC issues SEIS3 forms to the directors. These are certificates confirming the value of the equity investment so income tax relief can be claimed.
Investors can seek income tax relief in several ways, explains the website:
- By submitting a self-assessment return for the year when the SEIS shares were issued or an amended tax return for the previous year if carry-back is an option
- Investors without a tax return can ask for a PAYE coding adjustment to repay the relief in equal instalments over the rest of the tax year
- Taxpayers who owe income tax can set off the relief against the amount owed
Claiming CGT and loss reliefs
“Regardless of which way income tax relief is claimed, every SEIS investor is entitled to 50% of their equity stake as an income tax reduction no matter what rate they pay income tax.”
“Investors who request a PAYE coding adjustment or set –off against tax due still have to submit a tax return detailing their SEIS investment.
“Relief can be claimed up to five years after the January 31 following the tax year when the SEIS investment was made.”
Claims for capital gains tax relief or loss relief are made through the relevant sections of the investor’s tax return.