What is the purpose of section 257AE of the Income Tax Act 2007?

Section 257AE does not itself create any tax relief. It acts as a signpost to two capital gains tax reliefs in the Taxation of Chargeable Gains Act 1992 that complement the Seed Enterprise Investment Scheme income tax relief contained in Part 5A of the Income Tax Act 2007.

What is the SEIS disposal relief under section 150E of TCGA 1992?

Section 150E of TCGA 1992 provides that when an investor sells or disposes of shares to which SEIS income tax relief is attributable, any capital gain arising on that disposal may be wholly exempt from CGT. Any loss on such a disposal is also affected by these provisions.

How does SEIS reinvestment relief under Schedule 5BB to TCGA 1992 work?

Schedule 5BB to TCGA 1992 applies where an investor disposes of any asset and reinvests the proceeds into SEIS-qualifying shares. All or part of the chargeable gain that would otherwise arise on the original disposal can be deferred or exempted, provided reinvestment conditions are met.

Can an investor benefit from both SEIS CGT reliefs on the same shares?

Yes. An investor can claim reinvestment relief under Schedule 5BB to exempt a gain on a disposed asset by reinvesting into SEIS shares. Later, when those SEIS shares are sold, disposal relief under section 150E may exempt the gain on those shares too, provided SEIS income tax relief remains attributable.

Income Tax Act 2007 section 257AE

CGT reliefs relating to SEIS

Section 257AE signposts the capital gains tax (CGT) reliefs that are available in connection with shares qualifying for Seed Enterprise Investment Scheme (SEIS) income tax relief.

Section 150E of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) deals with gains or losses arising when SEIS shares are disposed of.
Where SEIS income tax relief is attributable to shares, any gain on their disposal may be exempt from CGT.
Schedule 5BB to TCGA 1992 provides a separate CGT relief where the proceeds from disposing of any asset are reinvested into SEIS-qualifying shares.
Without the Schedule 5BB reinvestment relief, those disposal proceeds would otherwise give rise to a chargeable gain subject to CGT.

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