Richard Mannion, the national tax director at Smith & Williamson, gives his insight on the confirmation of three new rules due to be implemented under Finance Act 2013.

Extension to SEIS and CGT reinvestment relief: good news for the enterprise economy

What's new: The CGT reinvestment relief of qualifying SEIS investments has been extended. Therefore, if a gain is made in 2013/14 – for example, on a second home or buy-to-let property - and a qualifying SEIS investment is made in the same tax year, half of the reinvested figure is exempt from tax.

If the gain was made in 2012/13 and not re-invested until 2013/14 in a qualifying SEIS investment, the full amount is exempt from tax.

Why is this important: "Qualifying investments can include, for example, a start-up run by a family member or friend, and the idea is to support funding to the enterprise sector. The tax relief is potentially significant and could be very helpful to entrepreneurial-minded people," said Richard Mannion, national tax director at Smith & Williamson.

£250,000 annual investment allowance (AIA) backdated, now 'fiendishly complicated'

What's new: the AIA is backdated to 1 January 2013 and will apply until 1 January 2015.

What does it mean? £250,000pa worth of investment can be deducted against income to reduce corporation tax. This is a large increase on previous amounts (£100,000 up to April 2012 and £25,000 from April to 31 December 2012).

Why is this important? "The increase in the AIA is very useful, but the constant changes in the upper limit make it fiendishly complicated to apply. Numerous businesses will therefore make mistakes with their claims and may end up having to pay back some tax," said Richard Mannion, national tax director at Smith & Williamson.

"Problems arise as the date of purchase does not determine the amount which can be offset against income. People therefore frequently under or over-estimate their investment allowance and either miss out on purchases or spend too much. The different maximum amounts must be apportioned over time to determine how much tax relief is due. Business owners should check the position before they go on a shopping spree."

Shares for employees in return for loss of rights, with effect from 1 September 2013

What's new: First £2,000 worth of shares given free of tax

If £2,000 worth of shares (or less) are given to an employee in return for loss of redundancy and other rights, the shares are free of income tax, national insurance and CGT (when sold). If the value of the shares when given exceeds £2,000 (but is less than £50,000) then income tax and NI is due on the portion above £2,000. The recipient must own less than 25% of the business's voting rights.

"Let's assume £5,000 worth of shares are issued. Personally speaking, I wouldn't give up my employment rights on redundancy, unfair dismissal and flexible working for £5,000 worth of shares bearing in mind that I would have an immediate income tax liability on the excess value over £2,000. For a taxpayer paying higher rate tax receiving shares worth £5,000 this would amount to a bill of £1,260 (£3,000 x 40% tax and 2% NIC) which they would need to pay out of their own pocket ," said Richard Mannion, national tax director at Smith & Williamson.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.