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Rules covering the enterprise investment scheme (EIS) and venture capital trusts (VCTs) are to be changed in an effort by the government to encourage investment in start-ups, small firms and entrepreneurs.
Such businesses can find it difficult to attract equity finance because the modest size of the figure required can deter investors, said the Treasury today as it published a consultation document seeking views from stakeholders on a new, tax-friendly initiative called the Business Angel Seed Investment Scheme (BASIS), and on a number of reform options to improve the effectiveness of the EIS and VCTs.
The year’s Budget raised the rate of EIS income tax relief to 30%, and announced an increase in the investment limit for individuals to £1 million, effective from April 2012, when the qualifying company limits for the EIS and VCTs will swell to 250 employees and gross assets of £15 million. At the same time, the annual investment limit for qualifying companies to £10 million.
The Chancellor’s Budget measures also included a commitment to consult on further support for seed investment and start-ups, simplification of the EIS and VCT schemes, and on ensuring they are targeted on genuine risk capital investments.
The Exchequer secretary to the Treasury, David Gauke, said, ‘The government wants to make the UK the best place in Europe to start, finance and grow a business, and we know that a vital part of this is ensuring access to a wide range of sources of finance.’
The newly released condoc is organised around three main themes: additional support for seed investment via the creation of a new scheme, simplification of the current schemes, and refocusing of the current schemes to ensure they remain appropriately targeted.
Responses should be submitted by email or post (Venture Capital Consultation, Excise and Enterprise Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ) no later than 30 September.
The director general of the Association of Investment Companies, Ian Sayers, remarked that ministers have ‘rightly identified small business funding as a political priority’, but he warned that ‘there is only a limited amount of investment to go around, particularly given the withdrawal of the banks from lending to SMEs’.
