Chapter 9 Tax Reducers

Question 1

Tax reducers - EIS/SEIS/SITR and VCT

Answer 1

Tax reducers are deducted after you work out the tax at the relevant rates. The marriage allowance and the married couples allowance is a tax reducer.
Enterprise Investment Scheme – a taxpayer obtains relief when they subscribe for shares in an EIS company. They must subscribe to the shares (so the company is issuing brand new shares to the taxpayer). The tax reducer is the lower of the amount subscribed and £1 million. The relief is given at 30%, the maximum reducer for 19/20 is £300,000. When the EIS company is a knowledge intensive company the max relief increases to £2 million. EIS tax relief can reducer a tax liability but cannot create a repayment.
Seed Enterprise Investment Scheme – tax relief when subscribing for shares in SEIS companies. Relief is calculated at the lower of the amount subscribed and £100,000, relief given at a rate of 50%, the maximum relief is £50,000.
Social Investment Tax Relief – tax relief when subscribing for shares or acquire debentures in a social enterprise (community interest company, community benefit society or a company). Income tax relief is available at a rate of 30% and is the lower of the amount invested or £1 million, maximum relief in a year is £300,000.
Venture Capital Trusts – tax relief when subscribing for shares in a venture capital trust, the tax reducer is 30% and is the lower of the amount subscribed or £200,000, the maximum relief in a year is £60,000.