Tax Benefits
Income tax relief is available for most UK taxpayer’s income which is subject to taxation whether through the PAYE system or self-employed assessment system except the notional tax credit on dividend income as that tax credit is not recoverable. The capital gains wipe-out relief follows on from the income tax relief so investors with just a CGT liability cannot claim this relief.
The following table summarises the tax benefits available to individuals under SEIS and EIS and how it compares favourably with VCT investments.
| VCT | EIS | SEIS | |
|---|---|---|---|
| Upfront Tax Relief | Up to 30% income tax relief | Up to 30% income tax relief | Up to 50% income tax relief |
| Capital Gains Relief | Nil | Deferral relief available | Up to 50% reinvested |
| IHT Free | No | Yes (after 2 years) | Yes (after 2 years) |
| Tax Free Exit | Yes | Yes | Yes |
| Tax Free Dividends | Yes | No | No |
| Limits 2018/2019 | £200 000 | £2m + carry back allowed | £200 000 + carry back allowed |
| Minimum Holding Period | 5 years | 3 years | 3 years |
SEIS
Income tax relief up to 50% of the amount invested up to a limit of £200,000 invested based on the income tax payable irrespective of the investor’s income tax rate or thresholds
Capital gain tax wipe-out relief up to 14% on capital gains you have which is 50% less than the normal charge for capital gains tax (“CGT”)
On the sale of an investment after three years, all capital gains will be tax free
If the investment has been held for at least two years, there is 100% relief from inheritance tax
If the investment fails, loss relief is available against taxable income (after deduction of the income tax relief obtained on making the investment)
EIS
Income tax relief up to 30% of the amount invested up to a limit of £2 million invested based on the income tax payable irrespective of the investor’s income tax rate or thresholds
Capital gain tax (‘CGT’) deferral relief up to 28% on capital gains
On the sale of an investment after three years, all capital gains will be tax free
If the investment has been held for at least two years, there is 100% relief from inheritance tax
If the investment fails, loss relief is available against taxable income (after deduction of the income tax relief obtained on making the investment)