Taxation of Chargeable Gains Act 1992 Schedule 5BB paragraph 5

Removal or reduction of the relief

Section 5 deals with what happens when SEIS income tax relief attributed to shares is withdrawn or reduced, and the consequent impact on any SEIS capital gains re-investment relief also attributed to those shares.

• Where both SEIS income tax relief and SEIS re-investment relief are attributed to shares, and the SEIS income tax relief is later withdrawn or reduced, a chargeable gain arises in the tax year the shares were issued.
• If SEIS relief is fully withdrawn, the chargeable gain equals the full amount of SEIS re-investment relief attributed to the shares immediately before withdrawal; if only reduced, the gain is a proportionate fraction of that amount.
• The proportionate fraction is calculated as (R1 − R2) / R1, where R1 is the SEIS relief attributed just before the reduction and R2 is the SEIS relief attributed just after — so a 60% reduction in SEIS relief produces a 60% clawback of re-investment relief.
• Following withdrawal or reduction, the corresponding amount of SEIS re-investment relief ceases to be attributed to the shares, ensuring the ongoing relief figure is consistent with the remaining SEIS income tax relief.