ACCA Advanced Taxation (ATX) Practice Exam

What benefit does SEIS provide compared to standard investment relief?

1. Higher capital gains tax relief

2. Greater income tax relief

3. No benefit, it's the same

4. Relief on losses only

The correct answer is: Greater income tax relief

The Seed Enterprise Investment Scheme (SEIS) provides significant benefits for investors compared to standard investment relief, particularly in terms of income tax relief. Under SEIS, investors can receive a higher level of income tax relief—up to 50% of the amount invested—on investments made into qualifying start-ups. This is a more attractive proposition when compared to other investment schemes, where the relief could be lower. The increased income tax relief under SEIS acts as an incentive for individuals to invest in early-stage companies that may embody higher risks. This additional relief is intended to stimulate investment in small businesses, fostering innovation and economic growth. While capital gains tax relief is also a benefit of SEIS, the standout feature that encourages investments is the substantial income tax relief provided at the outset. Therefore, this aspect makes SEIS distinctly advantageous for investors looking to maximize their tax benefits.