Tax year end planning: Tax efficient investments


Filed Under: Private Client

Planning tips for the tax year end.

Seed Enterprise Investment Scheme (SEIS)

This favourable relief, for investments up to £100,000, was introduced for the tax year ended 5 April 2013 and allows 50% income tax relief on qualifying investments into new start-up trading companies. In addition, there was a generous CGT relief that exempted gains made in the same year as the investment, up to the level of investment. The income tax relief continues unchanged for the tax year to 5 April 2014, but the CGT exemption is restricted to a reduced rate of 50% of the investment.

Although we are no longer in the tax year ended 5 April 2013, an election can be made to carry back an investment and treat it as if it was made in the prior year. Therefore, any taxpayer who has made capital gains in the tax year ending 5 April 2013 and would like to extinguish these permanently, must make the SEIS investment before 6 April 2014 to be able to carry this back to the tax year ended 5 April 2013.

Social investment relief

It was announced in the 2013 Autumn Statement that a qualifying investment made on or after 6 April 2014 into a qualifying social enterprise, will be eligible for income tax relief and a deferment of CGT, in line with other similar reliefs. A qualifying investment is either a subscription for shares or certain loans made where the investor does not have more than a 30% interest in the business. The relief will initially be available until 5 April 2019. The rate of income tax relief has not yet been confirmed.