Taxation of Chargeable Gains Act 1992 section 150E

Seed enterprise investment scheme

Section 150E sets out the capital gains tax rules that apply when an individual disposes of shares to which Seed Enterprise Investment Scheme (SEIS) income tax relief is attributable, including how gains and losses are calculated and how such shares are identified.

• Where a disposal of SEIS shares would otherwise produce a loss, the original cost of the shares is reduced by the amount of SEIS income tax relief received, thereby reducing or eliminating the allowable loss.
• Where SEIS shares are disposed of after the end of a specified qualifying period and a gain would otherwise arise, that gain is exempt from capital gains tax — but this exemption does not apply where the disposal results in a loss.
• If the individual did not receive the full amount of SEIS income tax relief (for example, because their income tax liability was too low), only a proportionate fraction of any gain is exempt, calculated as the actual relief received divided by the maximum relief available.
• SEIS shares are kept outside the normal share pooling and identification rules, and the usual reorganisation and share exchange provisions are disapplied, subject to certain exceptions where new ordinary shares are issued after the qualifying period by a company that has previously issued SEIS-qualifying shares.