SEIS capital gains: exemption and reinvestment relief

In short: SEIS disposal relief removes capital gains tax on a gain from selling qualifying shares held for at least three years, and SEIS reinvestment relief exempts half of a separate chargeable gain that you reinvest into SEIS shares. Both are described in HMRC helpsheet HS393.

Disposal relief: no CGT on the upside

If you claimed income tax relief on the shares, kept it, and hold the shares for at least three years from issue, any gain on disposal is exempt from capital gains tax. There is no cap on the size of the exempt gain.

Two conditions do the work here. First, income tax relief must have been claimed and not withdrawn - if the relief was never claimed, the exemption does not apply. Second, the three years run from the date the shares were issued, not from the date the company started trading or the date you paid.

Reinvestment relief: halving a gain you already have

This one is separate and often overlooked. If you make a chargeable gain on any asset - a property, a share portfolio, a business - and reinvest into SEIS shares in the same tax year, you can exempt 50% of the gain, up to the amount you have invested and on which you claim income tax relief.

The reinvestment must be matched with the gain in the claim, and income tax relief must be claimed on the same shares. If the SEIS conditions are later breached, the exempted gain becomes chargeable again.

Losses are not exempt in the same way

The exemption applies to gains. A loss on SEIS shares is not simply ignored - it is dealt with under loss relief, reduced by the income tax relief already received. So the asymmetry runs in the investor's favour: the gain is untaxed, the loss is relieved.

Claiming both

Disposal relief is reflected in the capital gains pages of your self assessment return when you sell. Reinvestment relief is claimed on the SEIS3 certificate and the capital gains pages for the year of the gain. Both are covered in how to claim SEIS relief.