Chancellor George Osborne has made the tax advantages of the seed enterprise investment scheme (SEIS) permanent.
‘Two years ago, I launched the seed enterprise investment scheme to help finance start-ups. It’s been a great success and I’m making it permanent,’ he said.
Osborne has set a rate of 30% income tax relief – the same as the rate for the enterprise investment scheme (EIS) and venture capital trusts (VCTs) – for the SEIS. Eligible social enterprises will be able to receive a maximum investment of around £290,000 over three years.
The government claimed that more than 1,600 companies had raised over £135 million through SEIS since April 2012.
The Treasury is also exploring options for extending the tax reliefs so they apply to convertible loans in start-ups.
However, the EIS, SEIS and VCT rules have been changed to exclude companies benefiting from renewables obligation certificates and/or the renewable heat incentive scheme.
The Budget document argued that this would ‘avoid subsidising low-risk activities that already benefit from certain government programmes’.
Furthermore, the VCT regime has specifically been altered to exclude those ‘conditionally linked in any way to a share buy-back or that have been made within six months of a disposal of shares in the same VCT’ from qualifying for new tax relief with effect from 6 April 2014.
VCTs will additionally be prevented from returning capital that does not relate to profits on investments within three years of the end of the accounting period in which shares were issued to investors.
Finally, Her Majesty’s Revenue and Customs will now be able to withdraw the tax relief if the VCT shares are disposed of within five years of their acquisition.