SEIS Investments – Changes announced in the recent Spring Budget could affect investors

Our Tax Director, Mary Tierney updates on an issue that could be facing many SEIS Investors.

If a taxpayer acquires shares in a company that qualifies for SEIS relief -they can claim an income tax relief of 50% of the amount the shares cost them in the tax year that they buy the shares or carry the relief back to claim against the previous tax year.

This relief can only be claimed once the investor receives the all important SEIS certificate – the SEIS3 – without this, no claim can be submitted and no tax relief given.

Because of this, investee companies and their advisors submit a request to HMRC to enable the company to issue this certificate as quickly as they can following an investment, the investors have given the company their money – the least the company can do is to give them the form to claim the tax relief due to them as promptly as it can.

In the autumn statement and confirmed in the spring budget the government have improved the age condition applying to companies raising SEIS money and increased the amount that they can raise from £150k to £250k – which is good news.

As a practice that regularly applies to HMRC on behalf of companies to get the approval to issue the SEIS certificates however, we quickly identified a problem with this, and we have contacted HMRC who have confirmed that the issue we have spotted is correct.

Where after 5 April 2023 a company raises funds under SEIS and either:

• It’s qualifying trade is over two and less than three years old or
• It raises more than £150,000 

Until the governments proposals in the budget become legislation, HMRC will not be able to permit these companies to issue the SEIS certificates. 

There is a process for budget proposals to become law – first a Finance Bill is drafted and this is debated and then approved by each House of Parliament.  Only then is it given Royal Assent and becomes the Finance Act – and so effective law. 

This means that there will now be a period of some months during which HMRC will be unable to process these SEIS investments to enable taxpayers to claim the relief due to them and also potentially a back log of applications for HMRC to process once they are able to issue the confirmations.  Companies will need to communicate this clearly to this class of investors or they will find they have dissatisfied investors before they have even got going.

If you would like to chat about how this affects you or if you have any other Tax query, please get in touch.