Jenson Seed EIS Fund - Clubfinance

46 Tax Reliefs 47Tax Incentive 5: Loss ReliefIn the event of a poor performinginvestment there is some return on thedownside through loss relief. If you makea loss on an investment in a SEIS QualifyingInvestment, the net amount of that loss(i.e. after deducting any income tax reliefobtained on making the investment) canbe set off against your taxable income inthe year in which the loss is made, or can becarried back to the previous tax year.Tax relief is available at any time inrespect of any loss realised upon adisposal of shares in a SEIS QualifyingCompany on which SEIS income taxrelief is claimed (see Tax Incentive 1above). The amount of the loss (aftertaking account of any income tax reliefinitially obtained) can be set againstthe individual’s gains in the tax year inwhich the disposal occurs, or, if not fullyused, against gains in a subsequentyear. Alternatively, the loss net of incometax relief may be set off against theindividual’s taxable income in either thetax year in which the disposal occurs, orthe previous tax year.Realised value of sharesNilGross investment in shares (£10,000)Less income tax relief at50 per cent£5,000Loss available for tax relief (£5,000)Tax relief (assuming incometax at 45 per cent next year)£2,250Net loss (£2,750)The net cost to Mr Smith after the tax reliefsin this example is effectively £2,750 on£10,000 invested.In his March 2012 Budget speech theChancellor of the Exchequer proposed thatfrom 2013/14 any investor seeking to claimloss relief will be restricted to a cap set at25% of their income or £50,000 whicheveris the greater. Draft legislation is due to bepublished in Autumn 2012.ExampleMr Smith is a 50% taxpayer and invests£10,000 into a SEIS Qualifying Investmentthat subsequently fails.