A quick one to set you pondering for the weekend.


A 50% taxpayer invests £100,000 under the Seed Investment Scheme in 2012-13. He has over £100,000 of chargeable gains in 2012-13, and thus he claims exemption for the maximum £100,000 in terms of his reinvestment in the SEIS company. Sadly the SEIS company fails in the same tax year, and he loses his investment, claiming relief for his loss against income tax, as he is permitted to do. How much tax relief does he obtain?

Income tax relief      50% SEIS relief on £100,000          £50,000

Capital gains tax exemption    28% on £100,000             £28,000

Income tax relief for loss on shares  50% * £50,000

(investment net of SEIS tax relief)                                           £25,000

Giving total tax relief of £103,000, or 103% of his investment. Even if the company only failed in 2013-14 or a later year, when the top rate of income tax is 45%, he would still obtain 100.5% tax relief.

Is this what the legislation intends? Will there be a thriving market in hopeless SEIS companies for people in this taxpayer’s position? Discuss.