HMR&C want you to save tax. Is that possible?

Last Wednesday I hosted an interesting event at the Eight Club near Bank Station. The interesting part of the evening was trying to locate the club which was down a pretty dodgy side street with very little guidance of where the actual Club was located. Once I found the entrance and descended down what seemed like a never ending staircase I was met by a club that only Heineken could have created.

There were poker tables, pool tables, a bar full of numerous beers and a cinema room to watch the football. If I was more organised I would have had the football on after the event, to the disappointment of Ray. This was my second event introducing business owners to the angel investment world and instead of me boring people to death with technical tax information, I thought I would liven it up a bit by having an entrepreneur talk about his business and how he succeeded with angel investment money and a speaker from Seed Mentors who definitely kept people awake.

The most introducing fact that came out of the event was that if an investor invests in a company who has been approved by HMR&C as a SEIS company then as well as obtaining a 50% tax refund they can cancel any capital gains tax that has arisen during the current tax year. This is possible as long as the amount of gain less the annual exemption is invested in a SEIS company. For example, if the capital gain was £50,000 and £40,000 was invested in a SEIS company, then you would get a tax refund of £20,000 and cancel your capital gains tax of £11,200. This is a very attractive proposition to those who have a capital gains tax this tax year as this relief does not apply for gains after 5/4/13. There are also generous tax breaks if the company fails resulting in a tax relief of 100.5%.

The difficult part of all of this is the timings of everything. You might well have a capital gains tax liability however how do you find SEIS companies to invest in before the end of the tax year? This is where Seed Mentors and other “fund” administrators have an important part to play as they have a pool of companies who have gained SEIS approval and are looking for investors.

So in the current media propaganda against tax planning, taxpayers might be able to get tax breaks with the blessing of the taxman without the threat of the media chastising you for being immoral.