What is the best form of tax relief? How about the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS)?
If you pay tax at the higher rate and have spare cash, no doubt you may be thinking about ways to reduce your tax bill.
There are different things that you can do, but one of the most effective ways is to invest in a company which meets the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) qualifying conditions.
Both the SEIS and the EIS are designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies.
Income Tax relief is available to individuals who subscribe for qualifying shares in a company which meets the requirements, and who have UK tax liability against which to set the relief.
The shares must be held for a period of 3 years, from date of issue, for relief to be retained. If they are disposed of within that 3 year period, or if any of the qualifying conditions cease to be met during that period, relief will be withdrawn or reduced.
Under the SEIS scheme, relief is available at 50% of the cost of the shares (30% under the EIS scheme), on a maximum annual investment of £100,000. The relief is given by way of a reduction of tax liability, providing there is sufficient tax liability against which to set it. A claim to relief can be made up to 5 years after the 31 January following the tax year in which the investment was made.
So if you are thinking to invest £100,000 and you have a tax liability of say £50,000 your liability is immediately reduced to NIL. Not only that, but if the company fails you are entitled to write of the balance of £50,000 as a loss against your future tax liability.
The other benefit, which is really important is that when the shares are sold after the 3 years qualifying period then there is no capital gains tax to pay.
Why not give us a call and explore the possibility of checking whether any tax relief is available?