ACCA Advanced Taxation (ATX) Practice Exam

What condition affects the CGT reinvestment relief when SEIS shares are sold within three years?

1. The total value of all shares sold

2. The company’s overall financial performance

3. The number of shares sold and the sale method

4. The market conditions at the time of sale

The correct answer is: The number of shares sold and the sale method

The correct choice highlights that the number of shares sold and the method of sale have a direct impact on the Capital Gains Tax (CGT) reinvestment relief associated with SEIS (Seed Enterprise Investment Scheme) shares when they are sold within three years. When SEIS shares are sold, to qualify for full CGT relief, certain conditions must be met. One critical aspect is the size of the shareholding being sold, as this influences the amount of relief that can be claimed. If a significant number of shares are sold, particularly those that were initially acquired under the SEIS, this may limit or entirely disallow the reinvestment relief, as the relief is intended to support the retention of shares in high-risk startups. Additionally, the method of sale can affect how the transaction is treated for tax purposes. For example, if shares are sold via a less favorable method or outside the scope of traditional sales (like an auction or forced sale), it might alter the ability to claim the CGT relief effectively. Understanding this condition is essential for investors in managing their tax liabilities and making informed decisions about when and how to dispose of their SEIS shares. This is particularly relevant for maximizing the tax benefits intended by the SEIS program, which is