What does section 257F of the Income Tax Act 2007 cover?

Section 257F provides an overview of the circumstances in which Seed Enterprise Investment Scheme (SEIS) income tax relief may be withdrawn or reduced. It identifies seven main triggers including disposal of shares, granting of call or put options, receiving value from the company, certain acquisitions by the company, and cases where relief was not originally due.

Can SEIS relief be withdrawn if an investor sells their shares?

Yes. If an investor disposes of SEIS shares, for example by selling them within the relevant period, the income tax relief may be withdrawn. HMRC will claw back the relief corresponding to the shares disposed of, while relief on any shares still held remains intact provided no other withdrawal events occur.

Why do call options and put options affect SEIS relief?

Granting call options or put options over SEIS shares can lead to withdrawal of relief because such arrangements undermine the genuine investment risk the investor is supposed to be taking. The SEIS is designed to reward risk-taking, so any mechanism that reduces that risk may trigger a clawback of the tax relief originally given.

What happens if an investor receives value from the SEIS company?

If an investor receives value back from the company during the relevant period — such as a loan, a payment, or certain other benefits — the SEIS income tax relief may be reduced or withdrawn in proportion to the value received. This ensures the investor genuinely commits capital at risk rather than extracting value indirectly.

Income Tax Act 2007 section 257F

Overview of Chapter

Section 257F provides an overview of the circumstances in which Seed Enterprise Investment Scheme (SEIS) income tax relief may be withdrawn or reduced.

SEIS relief can be withdrawn or reduced if the investor disposes of shares, or if call or put options are granted over them
Relief may also be clawed back where the investor receives value from the company during the relevant period
Withdrawal applies where the company acquires a trade, trading assets, or share capital in certain circumstances
Relief will be withdrawn where it is subsequently found not to have been due in the first place

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