Having raised more than £1.4 billion for almost 14,000 UK startups within a decade of launching, the Seed Enterprise Investment Scheme (SEIS) has become synonymous with the British startup scene in recent years, in part being down to the host of especially generous tax reliefs it offers private investors.
Offering advantages including everything from 50% income tax relief to capital gains tax exemption to loss relief, the SEIS has made a name for itself as a truly tax efficient investing tool, but how exactly can investors go about claiming SEIS tax reliefs?
What you'll need to have ready
There are three main routes you can follow to claim your SEIS tax reliefs, but regardless of which you choose, you’ll need one key document - an SEIS3 certificate.
An SEIS3 certificate is a certificate obtained from the company you have invested in containing the key information involved in your investment.Typically these are received around three months after the round formally closes.
Unlike when investing into an individual company direct with SEIS, when investing through a fund - such as a venture capital trust - investors can expect an SEIS3 form for each of the underlying companies within it, so it’s important to ensure all relevant sheets are to hand.
The SEIS3 contains the following information required:
- The full company name of the company you invested into
- The amount invested (and which your tax relief will be based)
- The date on which shares were issued
- The applicable HMRC office, as well as its reference
With your SEIS3 certificate to hand, on the assumption an accountant isn’t processing the reliefs on your behalf, you have three primary routes to using the certificate and claiming your tax reliefs.
Claiming SEIS tax relief via a paper-based self assessment tax return
Claiming SEIS tax relief on a paper tax return is a quick and simple process, requiring only three initial steps:
- Print off the ‘Additional information’ self assessment sheet (SA101) found on the gov.uk website, which you can access here.
- On page two of the form, under the heading titled ‘Other tax reliefs’ and under box 10 titled ‘Subscriptions for shares under the Seed Enterprise Investment Scheme’, detail the combined total of all of your SEIS investments of which you would like to claim tax relief on.
- Continue to fill and file your paper tax return as usual and post to the relevant HMRC office once completed.
If claiming SEIS relief via a paper-based self assessment tax return, no proof of your SEIS3 certificate is necessary to complete the process, However, it is important to keep a record of all of your SEIS3 certificates and any other COBs (certificates of beneficial ownership) as you may be requested to provide them as evidence of your investment at a later date.
Claiming SEIS relief via an online self assessment tax return
Claiming SEIS tax relief online is as straightforward as on a paper-based return, again following three simple steps to make your submission:
- Navigate to section three of the return, titled ‘Tailor your return’ and select ‘Yes’ under the question regarding ‘other tax reliefs’.
- On page two - ‘Other tax relief and deductions’ - scroll to the box titled ‘Subscription shares under the Seed Enterprise Investment Scheme’ and enter the combined value of all of your SEIS investments that you wish to claim tax relief on, also providing the relevant details of said investments when asked.
- Fill out the rest of your tax return accordingly and submit.
Claiming SEIS relief by submitting your SEIS3 certificate
Though claiming SEIS tax relief via a paper return and through an online self assessment form are the two most common ways investors usually opt for, there are additional options that can also be considered in certain circumstances.
The most common of the alternatives is by using the SEIS3 form itself. By completing pages three and four of your SEIS3 form once received, you can post it to your HMRC office for the process to begin.
This option can be necessary under a number of given situations:
- Should you wish to claim tax relief against a previous year by utilising the SEIS’s carry back feature (or simply that your SEIS3 certificate was not received before the tax return deadline).
- Should you pay your tax through as an employee using PAYE (Pay As You Earn) and wish to gain tax relief through an adjustment of your tax code.
- Should you wish to claim income tax relief alongside capital gains reinvestment relief.
Consult a qualified tax professional
Whilst outlining some of the potential stages involved in claiming SEIS tax relief and offering an insight into the process of investing via SEIS, this piece does not qualify as tax advice.
Before making any SEIS investment, it can be worthwhile to speak to a qualified tax professional to ensure you make best use of the range of tax reliefs on offer.