For Seed Enterprise Investment Schemes (SEIS), the CGT reinvestment relief continues for 2013/14, but for only half the reinvested gain. Therefore, the maximum tax relief for SEIS investment will in theory be 64% (50% income tax + 28% x ½ CGT reinvestment relief). The Government is not expecting this to encourage much investment – it estimates the extension of the relief will cost just £5 million in lost tax revenue.
Over three times more costly for the Treasury has been the growth in enhanced buy-backs operated by many venture capital trusts (VCTs). Buy-back schemes allow investors who have held their VCT shares beyond the tax relief claw back period (currently five years) to sell and immediately repurchase their holding with minimal expenses, but with the benefit of a new round of 30% tax relief. In 2011/12 £60 million was recycled in this way. The papers accompanying the Budget said “…the Government is concerned that VCTs offering enhanced buy-backs are not operating within the spirit of the legislation”, which sounds ominously like the threat of a future attack.