The good seed
Mr Osborne has announced a new tax relief from 6 April 2012 that seems almost too good to be true. We are familiar with the Enterprise Investment Scheme – subscribers for shares in small unquoted trading companies can enjoy a 30% income tax rebate on the amount invested. Under the Seed Enterprise Investment Scheme, this goes up to 50% – and capital gains realised in 2012/13 will be exempt if they are reinvested in a SEIS company. That can save another 28%, so £100,000 invested (the maximum) could only cost £22,000 after tax relief.
There are restrictions, of course. The company is supposed to be small (gross assets less than £200,000) and new (less than 2 years old, undertaking or planning to undertake a new trade). The investor can’t own more than 30% of the company, as with EIS. The company has to use the money in the business within 3 years of the share issue, or the relief is lost.
This is such an attractive incentive that keen investors are likely to outnumber good investments. Some previous schemes of this type have led people to throw their money at anything that appeared to qualify, sadly ending up with a tax-efficient loss. It’s definitely worth keeping an eye open, though, for anything that might succeed – even if the company lost half the £100,000, the investor would still make a good return!
