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"The circumstances in which you can claim Income Tax relief
If you have received a form SEIS3 for any investment you made in shares issued during the year ended 5 April 2013, you can claim relief provided you are eligible for relief in respect of the shares (see below).
How to claim Income Tax relief
Enter in box 11 in the ‘Other tax reliefs’ section on page Ai 2 of the *Additional information *pages, the total amount of the subscriptions on which you are now claiming relief (but not more than the maximum figure of £100,000).
Include any amount for which you received relief by way of an increase in your PAYE code or a reduction of a payment on account.Then enter details of each investment in the ‘Any other information’ box, box 19, on page TR 7 of the tax return.The details needed in respect of each investment are:
• the name of the company invested in
• the amount on which you are claiming relief for this year
• the date of issue of the shares
• the name of the HM Revenue & Customs office authorising the issue of the certificate, and their reference (as shown on the certificate)
• if you have subscribed more than £100,000 for shares on which relief could be claimed, how you want the relief attributed to them. See ‘How much Income Tax relief can you get for your subscriptions for shares’ on page 3 of this helpsheet.
List all subscriptions on which relief is claimed, even if you had to restrict the amount you entered in box 11 in the ‘Other tax reliefs’ section on page Ai 2 of the A*dditional information *pages, because it would have exceeded the maximum.
We may ask to see form SEIS3 to support your claim, so keep it safe."
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There was an email from Seedrs about this a little while ago...
EIS/SEIS Tax Information: Important Update
Dear InvestorsWe are beginning to receive the SEIS and EIS tax certificates from HMRC for the first companies to fund through Seedrs, and I wanted to take this opportunity to explain to you how the process works for you to claim relief. A detailed explanation is below, but the most important bit is that if you have made an SEIS- or EIS-eligible investment through Seedrs, please ensure that your postal address in your Seedrs profile is kept up-to-date, as we will be posting the relevant documentation to you when it becomes available.
Background
As you know Seedrs uses a nominee structure which means that we hold the shares as nominee on your behalf in any companies that you have invested. There are numerous advantages to this structure for both the entrepreneur and the investor, and ensuring that investors receive the appropriate EIS or SEIS tax relief in an efficient manner is a prime example of how this works in practice.
This e-mail explains how we will be handling the relevant tax paperwork, and what you can expect to receive from us to ensure that you can claim any tax relief with respect to your Seedrs investments. More detail on how EIS and SEIS work can be found on my blog post here: http://blog.seedrs.com/2012/10/27/ensuring-investors-are-protected-and-actually-receive-eis-or-seis-tax-reliefs/
Process
Any listing that is labelled as EIS or SEIS has been assessed by Seedrs as being very likely to be eligible for such relief. However, one can never be 100% sure with HMRC, which is why they operate an Advanced Assurance process. This enables a company to apply to HMRC, explaining the details of the relevant investment round, and asking them to confirm that if the investment round is completed accordingly, then they would grant the investors the appropriate relief (provided such investor is eligible himself).
Seedrs will never close a fundraising round and transfer the funds to the relevant startup company unless and until HMRC grants Advanced Assurance. We assist the company in making this application.
There a number of requirements that must be complied with by the company throughout the first few years of the investment, and failure to comply could mean that an investor could lose the relevant tax relief and any previously claimed reliefs could be clawed back. Seedrs executes a Shareholders Agreement with the startup company on behalf of the investors, and one of the many contractual protections in place is a requirement that the startup company refrains from doing anything which could result in an investor losing their tax reliefs. As nominee, we will be monitoring the company to ensure that this is followed in all but the most unusual circumstances, and that as far as is practically possible you will not lose your tax relief.
HMRC requires a few things to happen before they will allow investors to claim relief. In the case of SEIS, the company must either spend 70% of the funds raised or have been trading for four months before relief can be claimed; for EIS, the company must have been trading for four months regardless of how much money has been spent. This is why you have not received any tax documentation from us yet.
As soon as a company becomes eligible to do so, we work with them to file the relevant document with HMRC. They need to file what is known as a Form EIS1 (for EIS eligible investments) or a Form SEIS1 (for SEIS eligible investment). This is the company’s official application for relief.
Provided that HMRC approves the application for relief (which they are almost certain to do, given that they have granted Advanced Assurance), they will issue certificates, known as Form EIS3 and Form SEIS3, to the company. The company then fills in information on the certificates for each investor and provides the completed certificates to us, and we send them on to you. You will need to fill out the remainder of the certificate and submit it with your personal tax return. Please note that you will receive a separate certificate for each investment, and that unless you notify us that you expressly do not want to claim EIS or SEIS relief on a given investment, we will send you a certificate for that investment (you, of course, do not need to file it if you do not want to do so).
Finally, in the wonderful world of government bodies, all of this tax documentation has to be done by original signatures, and we are therefore required to send you the documents by post. As discussed above, please therefore ensure that your postal address on your Seedrs account is correct and up to date. We are working with HMRC to try to push forward digitisation of this process, and we will let you know as soon as a digital solution becomes available.
As always, please don't hesitate to contact me should you have any questions.
Best wishes
Thomas Davies
Investment Director -
Gist is...
We meet the trading period requirement, and relief can be claimed. It's a slow process, you guys are being too eager with your returns (I am too, it's cool).
Seedrs will be notified by HMRC when it's eligible, and they will then receive the paperwork to be completed, work with us, and then we get back the SEIS3 after we've made our filings, and that SEIS3 is then forwarded to you.
So... we're waiting for HMRC to notify Seedrs.
Just spoke to Seedrs, and if you have questions they're happy to field them. They will also chase HMRC to see whether the penny has dropped over there.
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with first year relief at 50% of investment it's worth chasing!
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Yes, and it's not like it's not happening, but your expectations of how fast HMRC move may not be realistic.
The important part of the Seedrs stuff above is just this:
HMRC requires a few things to happen before they will allow investors to claim relief. In the case of SEIS, the company must either spend 70% of the funds raised or have been trading for four months before relief can be claimed; for EIS, the company must have been trading for four months regardless of how much money has been spent.
We're using SEIS and not EIS.
Have we spent more than 70% of the money? No.
Have we been trading more than 4 months? Yes.
Does that mean it's eligible, yes but only very recently (weeks, not months - based on the investment date).
That recency of eligibility is why you haven't yet received anything, and seriously I phoned my accountants yesterday, phoned Seedrs, had a few Skype chats, and have the lawyer at Seedrs pursuing HMRC.
It really is being chased, but HMRC are glacial in some things and we were only recently eligible.
Seedrs have a very big incentive to ensure that you guys, as investors, are accommodated as quickly and smoothly as possible.
It may not be possible for them to make HMRC go any faster, but Seedrs, Microcosm, and our accountants will turn round all of our obligations in hours (days at worst), but as the process includes waiting on HMRC filing forms and waiting on HMRC some more... we can't actually move faster.
Remember that Seedrs aren't just match-making on a 1-1 basis, they hope and expect investors to diversify their portfolio and hope the entrepreneurs will hyper-focus on their startup... effectively Seedrs values you the investor far higher than they value me the entrepreneur. All of their incentives are to ensure you guys are totally happy.
If and when I hear anything, I will share it. I reckon that Seedrs will communicate with you guys when they have concrete updates from HMRC, whereas I can tell you as and when I perform my bits of the process along the way so that you can get a realistic expectation of when it will be fulfilled. So when I receive the SEIS1 to file, I'll tell you. When it's filed, I'll tell you. When I get the SEIS3 back, I'll tell you. Then Seedrs will be the one to distribute that (I believe).
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Where we are on SEIS.
There's a fundamental question about whether we can yet file our SEIS1 to get you guys your tax relief.
HMRC in some places state that we must have spent 70% of the money or have been trading 4 months.
In other places, namely the SEIS1 form and the guidance for that, only the 70% spend is mentioned, and we still haven't spent that much and would not yet be eligible for relief.
On the 4 months trading thing, the definition of this is vague and the accountants believe it means from the moment we launched the prototype and/or have taken in any revenue. Not the moment the company was founded or work began on the product.
If that is the case, then we still haven't met that requirement either.
The accountant has a tax expert assigned to basically resolve this, and to tell us whether the definition of trading allows us to file the SEIS1 soon, or whether we actually have to wait another couple of months to have triggered the 70% spend or the 4 months trading.
Filing this form incorrectly (a false statement) carries a penalty of £3k, hence our hesitation to file if we are not confident the statements we are making are accurate... which comes down to the definition of the word trading.
This is incredibly dull stuff, but it is still being worked on.
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1 - not a problem to invoice you so as to ensure crossing the 70% threshold!
2 - as regards trading, HMRC BIM75705 advises > http://www.hmrc.gov.uk/manuals/bimmanual/bim75705.htm
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Right... accountants have got back to us.
The tl;dr is that we will wait a few more months as we currently meet neither criteria.
Tax Accountant:
The definition of commencing to trade refers to the open market sale of a product, goods or services. There is a significant body of case law on this particular point and HMRC's own detailed manuals make it clear that until that point they consider the company being in a state of Research and Development in preparation for a Trade.
I appreciate that the SEIS guidance is actually very poor on this point, but HMRC make it clear that this is just guidance and has no statutory authority. It is relatively common for HMRC's guidance notes to be incorrect and incomplete - and that this fact does not prevent HMRC disallowing claims or issuing assessments (again this is subject to case law up to the Court of Appeal which decided in HMRC's favour) The cynic in me thinks that HMRC's guidance is deliberately poor given how detailed and complicated the legislation actually is.
Given how valuable the relief is, we expect HMRC to be very strict on when qualifying periods are met, and an early claim could prejudice this.
So our advice is that the claim should not be submitted until 70% of the monies raised has been spent. On this note HMRC have made the point that if the company has other income arising (as I know you have done) then it considers that this is normally spent first before the money raised through the share issue.
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And gives me a bit longer to work out how I go about having to fill in a tax return
sigh
Might it be possiable for a company in that situation to never spend 70% of the shares amount raised?
So our advice is that the claim should not be submitted until 70% of the monies raised has been spent. On this note HMRC have made the point that if the company has other income arising (as I know you have done) then it considers that this is normally spent first before the money raised through the share issue.
So, you raise £100,000, and spend £60,000 of it getting the product up and running, and making profit sooner than expected. The company's cash in the bank never dips below the £40,000 level, as it's now running on the revenue being generated, therefore never hitting the 70% spend threshold.
I suspect that that is the situation that the 3 months trading is to cover though.
Another minor thing - is that 70% of the total that you raised (i.e. 70% of £50,000) or 70% of the money that you recieved (i.e.70% of (£50,000-£seeders took))?
All good fun.
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interesting read on real benefits to eis and seis investors
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itr = utr on your sa return
co ref = microcosm co reg number as filed at companies house
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Ok, trying to fill in my SEIS3 form.
I seem to be missing some info...Investor tax reference : what is this (not NI number as that is asked for below) and where can I find it? P60?
Company reference number?
Anyone filled it out and can point me in the right direction?
Anyone know about the investor tax reference?
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thank you soul,
the Investor Tax Reference is also your Unique Tax Reference, as used in your self assessment form. typical of hmrc to use confusing terms.
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Gah! I can't even read acronyms. Thanks for pointing that out. That said I do PAYE so not sure if I have one... unless it's hidden on my payslip somewhere.
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SEIS tax affairs
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@rive_gauche
HMRC helpsheet hs393 gives guidance for claiming relief on SEIS.
vb, does Microcosm have form SEIS3 for tax year to 5th April 2013, or are Seedrs administering this?
seis for dummies