Budget 2013 reaction: The Seed Enterprise Investment Scheme (SEIS)

How was the two-year extension to the capital gains tax relief received and will it boost start-up investment?

Business angels were today told capital gains realised in 2013/14 will qualify for tax reliefs tied to the Seed Enterprise Investment Scheme (SEIS).

The chancellor’s announcement confirmed that providing the gains are reinvested in the same year or the next, business angels stand to benefit from tax relief on half of the gain.

To be eligible for SEIS, companies must have less than £200,000 in assets and fewer than 25 employees. So how did business commentators respond?

James King, managing director, Find Invest Grow “There is room for the government to think more creatively about tax cuts/reliefs to increase liquidity, especially in start-ups. For example, unclaimed tax relief investors receive from the EIS and SEIS initiatives could be passed on to the start-up receiving investment. Start-ups could offset investor’s relief against corporation tax over two years, as well as NIC or VAT. This approach would provide tax reliefs to those that really need it, while incentivising investors.”

Louise Farley, managing director, City Alliance“We are delighted that the chancellor recognises the role that SEIS has to play in delivering increased economic growth and employment. With attractive tax incentives already in place under the Enterprise Investment Scheme, it is still too early to tell what impact its little sister, the Seed EIS will have in contributing to our recovery.  But one thing’s for sure, funding for early stage and start-up companies needs to improve and the government’s announcement today is a positive step to boosting activity in the smaller business sector.”

Debbie Griffiths, private markets tax partner, Deloitte“SMEs, particularly in the early stages, looking for much needed assistance with raising finance should be aided by the extension to the SEIS. Since it offers tax relief to individuals who buy shares in start-ups, it will encourage investment into small enterprises that may otherwise struggle for external funding.”

Mike Hayes, tax partner, Kingston Smith LLP“The extension of the SEIS reinvestment relief to 2013/14 is very welcome, even though the exemption is limited to only half the amount reinvested. SEIS has been popular and this change should make sure it remains an attractive means of raising funds for new businesses and is attractive to potential investors.”

John Williams, managing partner, Kuber Ventures“The extension of the capital gains tax relief for SEIS was signalled by the chancellor as a victory for small businesses, but while many will appreciate the sentiment, the fact that the relief has been cut by 50% will have dampened spirits slightly. Noticeably absent from the chancellor’s speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the government offer more help to start-up companies looking for second round finances, but nothing materialised.

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