This share offer has Advance Assurance from HMRC that it qualifies for Seed Enterprise Investment Scheme Tax Relief. That means investors will be able to claim tax reliefs on the value of their investment:
- 50% of their income tax liability for the current or previous tax year (you choose which one to claim it against)
- 50% relief of Capital Gains Tax on any capital gains used to invest into the share issue
So, if you invested £500, you would be eligible to reduce your tax bill by £250. If you used a capital gain to make the investment, you’d also reduce your capital gain tax liability on it from £140 to £70, giving a combined tax benefit of £320 In order to benefit from the tax relief, you must be a UK income and/or capital gains tax payer with tax due to pay equal or greater than the amount of relief you’re seeking.
Equal Care Co-op would be likely to apply for the tax relief certificates in summer 2019, and send them to investors shortly after that. The tax relief can be applied to the year you choose – either the year the investment was made, or the previous tax year.
If you pay tax via PAYE, you send the certificate to the tax office that processes your employer’s payroll tax collection, and if you do self assessment, you claim the relief when completing your tax return (unless you want to backdate it for a tax year you’ve already filed a return for, in which case you have to contact HMRC directly).
SEIS investment is only available on the first £150,000 of investment from individuals (i.e. excluding organisational investment). Individual investments after the first £150,000 will be eligible for Enterprise Investment Scheme relief at 30% of the total invested, but note that there is no capital gains tax relief with EIS.
As a condition of being able to offer the relief, no investment can be withdrawn for at least three years after the date of the investment, and Equal Care will therefore not be in a position to consider withdrawal requests until 2022 at the earliest, and their financial projections are built around this withdrawal starting the following year, in 2023.
Tax advice cannot be given, and the Society can only vouch that the investment is a valid investment for tax relief. Anyone considering investing with tax relief in mind should contact a financial advisor to establish whether they themselves would be eligible.