PT35b SIES

Question 1

What are the conditions for an SEIS company

Answer 1

• An unquoted trading company with a permanent establishment in the UK.
• Prohibited trades include financial trades, farming, market gardening, hotel and
  property development.
• Company’s assets must not exceed £200,000 before the share issue.
• Company must employ fewer than 25 full-time equivalent employees.
• The cash raised by the issue of SEIS shares must be used for the trade within three years.
• The qualifying activity must be a trade which is not more than two years old.

Question 2

Income tax consequences of subscribing for SEIS shares?

Answer 2

Income tax reducer
* 50% × amount subscribed (maximum £100,000 @ 50%)
Can only reduce income tax liability to nil
* Can carry back the SEIS subscription to the previous tax year
* Provided limit for that year not exceeded

Question 3

Whare the conditions for subscribing for SEIS shares?

Answer 3

• Must not be ‘connected’ with the SEIS company (ie must not be an employee nor hold more than 30% shares in the company)
• Must own the shares for at least three years (otherwise income tax reducer withdrawn)

Question 4

If sold within three years?

Answer 4

• Clawback is the lower of:
  – Original income tax reducer
  – 50% × sale proceeds received (only applicable if sold for a loss)
• Income tax reducer clawed back by an assessment for the tax year in which relief given
• No withdrawal of income tax reducer if sold after three years
• Can claim for loss to be set against income of current year and/or preceding year.

Question 5

Risk to capital condition?

Answer 5

In order for an investment to qualify for SEIS income tax relief, it must be reasonable to conclude the following:
* The objectives of the company are to grow and develop its trade in the long term.
* There is a significant risk of a loss of capital greater than the return on the investment taking into account the value of the SEIS relief.