Individuals who have investment properties, second homes or shares standing at a gain should consider taking action before 5 April 2013 to trigger those gains in this tax year. They could then invest in the seed enterprise investment scheme (SEIS) before 5 April 2014 to wipe out their 2012/2013 gains completely.
WHY THE 5 APRIL 2013 DEADLINE?
Until 5 April this year, an individual can sell any asset at a gain and not pay any capital gains tax on up to £100,000 of gains provided the individual then invests in a company qualifying for the SEIS by 6 April 2014. That can save the investor up to £28,000 of tax. From 6 April 2013, there will be no equivalent relief for capital gains realised in 2013/2014 and future years.
WHAT IF I HAVE PROPERTY OR SHARES STANDING AT A GAIN BUT I DON'T WANT TO SELL BY 5 APRIL 2013?
We have devised a special technique for potential SEIS investors who do not want to sell their second homes, buy-to-let properties or shares by 5 April 2013. Individuals can still achieve up to £28,000 of capital gains tax savings and up to £50,000 income tax relief without selling the property or shares. This opportunity also only applies until 5 April.
SEIS AND TAX RELIEF
Individuals can invest up to £100,000 into the SEIS by subscribing for shares in certain small companies that need start up capital.
Individuals who invest in SEIS can benefit from the following tax reliefs:
- Income tax relief at 50% (even if they are not a 50% tax payer);
- No capital gains tax when the shares are sold in the future;
- No capital gains tax on any gains arising in the 2012/2013 tax year which are invested in the SEIS shares before 5 April 2014; and
- 100% inheritance tax relief on the SEIS shares if they are owned for two years.
SEIS companies are potentially very risky and any investment needs to be considered carefully. However, the tax reliefs are very generous, and in certain circumstances individuals could even end up with more in net terms than they started with, even if the SEIS shares become worthless.