How Does SEIS/EIS Carry Back Work?

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How does SEIS/EIS Carry Back Work? 

Financial commentators and analysts are all speculating on how Chancellor Rishi Sunak will eventually have to fill the gap in the nation’s finances either through tax rises and possible spending cuts. Frankly speaking, we cannot claim to have any special insight on what he might do in this or subsequent budgets.

What we do know, is that currently, EIS and SEIS schemes enable individual investors to claim relief on CGT and income taxes paid in previous years. Read more about investing in RLC Venture's SEIS or EIS Funds.

Carry Back Example

Investors are eligible for up to 50% tax relief through the SEIS scheme and 30% through EIS. These tax reliefs are limited to £100,000 of SEIS and £1m of EIS qualifying investments. If investors did not use the prior tax years EIS/SEIS allowance (e.g. 19/20 Tax year) investors might be able to claim any previous tax years relief in addition to the year in which they are investing - essentially doubling the allowance for that year.

We've highlighted how this works in an SEIS carry back example below:

SEIS Carry Back Example

SEIS Carry Back Explained

EIS and SEIS investments offer a “carry back” facility which means investors can elect for all or part of their EIS/SEIS eligible shares acquired in one tax year to be treated as though they had been acquired in the previous tax year.

This gives EIS investors the option to offset the tax relief against income tax from the previous year.

Please note: You can only do this if you have sufficient EIS (£1m) or SEIS (£100k) allowance in the tax year to which you’re carrying back. If you previously used these allowances you will not be able to carry back any EIS or SEIS relief. Tax benefits depend on personal circumstances and tax rules can change. There are detailed conditions and rules you should consider carefully before investing. If unsure, seek advice.

See VCM35160 for how to make claims or read our article on how to claim SEIS tax relief here.

Carry Back Limitations

Explore our EIS & SEIS Funds and invest in UK-based software startups with global ambitions.

*the source of this article is provided by the HMRC government website, for more on SEIS and EIS carry back click here.