Supporting those who need extra help - CIOT comments
The source of the press report is HMRC‚ s view, as set out the Venture Capital Schemes Manual at VCM45010, that if an investor re-invests all or part of the amount of a capital gain arising in 2012/13 in SEIS shares either in 2012/13, or in 2013/14, subject to an election under ITA 2007 section 257AB, then that gain is exempt from capital gains tax.
HMRC have confirmed that the current legislative position as it was enacted in Finance Act 2012 operates as follows:
The SEIS legislation of ITA 2007 Part 5A grants relief against income tax at a rate of 50% of the amount invested in shares, which meet the qualifying conditions of the scheme. TCGA 1992 Schedule 5BB provides that if the amount of a capital gain accruing on the disposal of an asset in 2012/13 is reinvested in shares which qualify for SEIS income tax relief, then no CGT is chargeable on that gain. This is a one-off relief applying only to 2012/13 gains, where those gains are reinvested in shares acquired in 2012/13. For income tax purposes, ITA 2007 section 257AB(5) gives an investor scope to elect to have some or all of an issue of shares to be treated as though acquired in the tax year immediately preceding that in which they were actually acquired. The SEIS rate for that earlier year is then applied to the shares which are the subject of the election. TCGA 1992 Schedule 5BB Paragraph 8(3) provides that where there has been an election under ITA 2007 section 257AB(5), the shares which are the subject of the election are also treated for the purposes of Schedule 5BB as having been acquired in the earlier tax year. The result of all of those pieces of legislation is that if an investor re-invests a capital gain arising in 2012/13 in SEIS shares either in 2012/13; or in 2013/14 subject to an election under section 257AB, then that gain is exempt from capital gains tax. It does not permit the amount of a 2013/14 gain to be invested in 2013/14 and become exempt from capital gains tax.