ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum amount of SEIS reinvestment relief that can be claimed?

1. 50% of the chargeable gain

2. 50% of the total investment

3. 50% of the amount invested in qualifying SEIS shares

4. 100% of the chargeable gain

The correct answer is: 50% of the amount invested in qualifying SEIS shares

The maximum amount of SEIS (Seed Enterprise Investment Scheme) reinvestment relief that can be claimed is based on the amount invested in qualifying SEIS shares. Specifically, investors can claim relief on 50% of the amount they invest in qualifying SEIS shares, which effectively allows them to reduce their capital gains tax liability. SEIS is designed to encourage investment in small, high-risk companies, and the relief can be claimed by individuals who invest in such companies. The rule that allows 50% relief applies to the total amount of the qualifying investment, making it a significant encouragement for investors looking to support startups. The other options do not accurately represent the SEIS reinvestment relief structure. For instance, claiming 50% of the chargeable gain does not align with the purpose of the scheme, which focuses on the actual investment made by the individual. Similarly, stating a percentage of the total investment without specifying that it refers only to qualifying SEIS shares fails to capture the specific investment nature required for SEIS relief. Lastly, suggesting 100% of the chargeable gain overstates the benefit provided by the SEIS, as only a portion of the investment amount incentivizes the specific investment in qualifying shares.