What are SEIS3 and EIS3 certificates?
Following investment into an SEIS or EIS qualifying company, each investee company will issue either a SEIS3 or EIS3 certificate, which HMRC considers to be proof of investment into a qualifying company, and allows investors to claim tax relief.
Typically, certificates are received 6-12 weeks after the date investment was made into the underlying qualifying company. In the case of SEIS and EIS funds, investors will usually receive multiple certificates (one per each company that has been invested into). It can take 12 months, sometime longer, before an investor receives their full complement of tax relief certificates as it takes time for the fund manager to make investments on behalf of the investor.
What Tax Relief can you claim?
Individuals can claim up to 50% income tax relief on SEIS for a maximum investment of £100,000 and 30% income tax relief on EIS for a maximum investment of £1 million in any tax year. However, the amount of income tax relief claimed cannot be more than the investor’s income tax bill for the year of claim – the tax relief can only reduce an individual’s income tax bill to 0. The tax year(s) in which an investor can claim the tax relief is based on the year in which the SEIS or EIS shares are issued, the date of the certificate is irrelevant, but the certificates do allow an investor to make their tax relief claim through self-assessment.
How to claim your Tax Relief?
Once an SEIS3 or EIS3 certificate is received, investors can claim their tax relief from HMRC by doing the following:
- Tear off and keep Page 1 Certificate of the SEIS3/EIS3 form
- If your address has changed from the original address in the form – send a cover letter with updated address on it and enclose with the form
- Complete Pages 3 & 4 of the form – choosing the preferred option: Tax Relief in PAYE coding or Tax Relief for a previous year
- See the further notes on page 4 of the form
- Send to your HMRC Office for completion.
Alternatively, investors can claim their tax relief online via self-assessment by doing the following:
- In the ‘Other Tax Reliefs’ section (page Ai2), enter the total amount of subscriptions, which you are now claiming SEIS or EIS tax relief on, in box 10.
- Go to the ‘Any other information’ section (page Ai4) and in box 21 enter details from the SEIS3 or EIS3 certificate including name of the company invested into, date of share issue and details of the issuing HMRC company.
Please note that as well as claiming tax relief in the year the investments are made, investors can choose to claim tax relief in the previous year using ‘carry-back’ rules (subject to the limits of £100,000 for SEIS and £1 million for EIS for that tax year) and claims can be made up to 5 years after the investment was made. The ‘carry-back’ facility allows all or part of the cost of shares acquired in the one tax year, to be treated as though those shares had been acquired in the preceding tax year. Relief is then given against the Income Tax liability of that preceding year rather than against the tax year in which those shares were acquired. This is subject to the overriding limit for relief for each year.
For example, the tax relief for an investment made into an underlying company in tax year 2017/18 can be claimed off the investor’s 2016/17 income tax bill.