Ownse is now raising money on the popular crowdfunding website Seedrs.com
We are currently raising £100K and the good news is that anyone can invest. You don’t have to be a big business to get involved and own shares in this new app.
The crowdfunding qualifies for SEIS, so investors can reclaim 50% tax relief. There is a good video on the merits of SEIS at SEIS Window
For most people, investing and claiming tax relief can seem a little confusing, so we have put together this list of Q&A’s with advice from The Tax Practice to help you on your way.
How much tax do I get back?
If you invest (say) £2,000 then under SEIS you get a tax refund of £1,000. Investors reclaim 50% of the sum invested. The maximum you can invest in any one tax year is £100,000.
I am on a salary and only pay basic rate income tax?
It does not matter whether the investor pays tax at 20%, 40% or 45%, you obtain the same amount of tax refund i.e. 50% of the sum invested. This is especially advantageous to basic rate taxpayers.
I have a state and private pension and a small amount of investment income?
Provided your private pension has had sufficient tax deducted (in this example £1,000) then this tax will be refunded to you in the same way as if you had a salary i.e. by PAYE code adjustment or tax reclaim.
I have mostly property income and some dividend income?
Again, provided you pay or are liable to pay for example £1,000 tax then this will be deducted from any liability you have or refunded to you, if already paid.
I only have dividend income from my own company and a small salary which covers the personal allowances?
In this case you have not actually paid any tax as the tax credit attaching to dividends is non-refundable. In this case you would need to increase the level of salary paid from your company by the same amount as your investment. So if you invest £10,000 you would increase the amount you draw by way of salary by £10,000 in that same tax year.
How do I actually get a tax refund?
- If you are on PAYE then your PAYE code may be adjusted so that your employer deducts for example £1,000 less from the tax the employer would have deducted from your salary.
- If tax has already been paid then a tax refund is claimed.
- If you submit a tax return then a deduction is claimed on the tax return for tax of £1,000 in this case.
When do I claim the tax refund?
HMRC will authorise the company to notify each shareholder when they may claim tax relief on their investment. This tends to be the earlier of
- 4 months after the company has traded or
- after 70% of the funds have been spent.
Can I claim a tax refund in respect of an earlier year?
You can treat the shares as having been issued in the previous tax year and for tax relief to be claimed in respect of that earlier year.
How long do I need to retain the shares before I can gift or sell them?
A tax refund is made on the understanding that the shares will be held for the three year qualifying period. After that time the shares can be sold or gifted tax free.
I sold a property this tax year. Would my investment in Ownse Ltd also reduce my capital gains tax liability?
Gains of up to 50% of the sum invested can be exempted from capital gains tax. For example, if the property was sold on which a gain of £30,000 had been made and you invested £20,000 in Ownse Ltd then £10,000 (50% x £20,000) of the gain would be exempt. This leaves £30,000 – £10,000 = £20,000 chargeable to capital gains tax. This balance may be covered by a couples annual CGT allowances resulting in no CGT liability.
If the company is sold, what is my tax position?
Provided the shares have been held throughout the three year qualifying period then no capital gains tax liability arises. The sale of the shares is capital gains tax free.
Can I gift the shares to members of my family?
The same capital gains tax exemption applies on gifting as it does on sales after the three year qualifying period. There may also be inheritance tax reliefs which can be claimed where shares are gifted or held in an estate on death.
If the company fails in the first three years, can I obtain any further income tax relief on the loss made?
Provided the company had traded then there is the likelihood of being able to claim further income tax relief on the net cost of the shares. So if the shares cost £2,000 after SEIS tax relief of £1,000, the net cost is £1,000. If the shares are of negligible value, a claim can be made to deduct the net cost of £1,000 against other income and capital gains reducing the tax by the taxpayer’s marginal income tax rate. E.g. £10,000 x (say) 45% = £4,500
What is the maximum the company attract under the terms of SEIS?
The maximum a company can attract by way of investment which qualifies under SEIS is £150,000. This is a maximum figure over the lifetime of the company not an annual figure. The investment must also be made within two years of the company first starting to trade.
What is the minimum and maximum one individual investor can invest ?
An investor can invest up to £100,000 per annum under SEIS. This may be in the same or any number of qualifying companies.
There is no minimum investment.
The Tax Practice
Chartered Certified Accountants
Tel: 01732 743553 Email: firstname.lastname@example.org