Investors in start-up companies to get 50% income tax relief

Accountants may be interested in the Chancellor’s decision to give tax breaks to start-up companies.

In his Autumn Statement on Tuesday, George Osborne announced a Seed Enterprise Investment Scheme providing income tax relief of 50% on their investments. He also waived tax on capital gains invested in the SEIS in 2012/13.

The government wants to encourage economic growth and many tax accountants believe the SEIS will provide real tax benefits for new businesses.

Tony Bernstein from HW Fisher & Company explained that the CGT waiver plus income tax relief of 50% will provide tax relief of up to 78%. The government is providing a strong incentive for people to invest in the UK’s start-up businesses.

PwC partner, Mary Monfries, said that any measures to encourage investment have to be good for enterprise. Individual investors will still need to assess the risk but the tax break will limit any downside. She did also make the point that angel investors would have been disappointed that the Chancellor did not take action to make it easier to invest.

Deloitte’s head of tax policy, Bill Dodwell, said the enhanced tax relief will cost the Treasury about £50 million next year. 78% tax relief will make SEIS attractive to individuals wishing to invest in start-ups. However, he pointed out that the rules are unlikely to allow individuals to invest in connected companies, so they will not be able to benefit from tax relief on investments in companies they control.

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