Under plans unveiled by chancellor George Osborne, investors will be able to extinguish capital gains tax made up to 6 April 2013 by investing in a Seed Enterprise Investment Scheme (SEIS) in the next tax year.
Old rules meant that tax exemption was only available on gains realised in 2012-13 then invested in the same year.
Explaining the decision, Osborne said, ‘This will make the UK one of the best places for innovation.’
Osborne added, ‘Our Seed Enterprise Investment Scheme offers generous incentives to investors in start-ups.
‘My HF for Braintree and David Young have done a great job helping promote it around the country. They have asked me to extend the CGT holiday – and I will.’
More on the Budget 2013:
- Corporate tax cut accelerated
- Entrepreneurs’ wish list for Budget 2013
- Growth market boost as stampt duty tax on AIM shares eliminated
James King, managing director of Find Invest Grow (FIG), a VC firm which invests in start-ups founded by students and recent graduates, comments, ‘SEIS was hailed as a great scheme in the Budget so why not do more with it. Our experience shows that investors tend to stop investing when the relief dries up.
‘To incentivise investment the government could make provisions to pass on unclaimed tax relief 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 and result would be a steadier flow of investment into start-ups throughout the tax year rather than the peaks and troughs traditionally seen around the beginning of the tax year.’
More on the Seed Enterprise Investment Scheme:
Capital gains tax can be extinguished completely by investing in a SEIS. This is compared to other seed capital schemes such as Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT), where capital gains tax is only deferred by re-investing into another scheme.
Elliot Jacobs, founder of online office supplies company UOE, adds, ‘Osborne has got more out of the money available than I thought he’d get and has given a strong signal that the way out of the economic crisis is through entrepreneurial business.
‘Business is the solution and a lot of what has been announced will help business to grow, creating jobs, paying taxes and boosting the economy.’
