Venture capital schemes
Please note that the details on this page reflect the contents of the 2008 Budget and its associated paperwork. Some points may therefore have been superseded by subsequent events.
The Government has announced that, subject to European Commission approval, the limit on the amount that an individual can invest in a company under the Enterprise Investment Scheme (EIS) and claim income tax relief will be increased from £400,000 to £500,000 per tax year for shares issued on or after 6 April 2008.
In addition, the Government has indicated that the activities of shipbuilding and coal and steel production will not qualify for EIS or for Corporate Venturing Scheme purposes in respect of shares issued on or after 6 April 2008 and for Venture Capital Trusts for money raised on or after this date.
The increase in the investment limit for EIS income tax relief is welcome for individuals. However, the increase may only prove to be of limited benefit considering the restrictions introduced over the last few years regarding funding limits (for example, the limit of £2m a company can raise over a 12 month period under all three schemes in aggregate). In general, the excluded activities being introduced are unlikely to impact severely on the venture capital scheme.
The Government has also issued a consultation paper, which seeks to review the rules and processes governing the EIS. The aim of the consultation is to determine how the scheme can be made more accessible for relevant companies and their investors.
The main focus of the consultation paper appears to be addressing ways in which the EIS can be simplified and ways in which the relief can be focused on the companies for which it was intended. It is hoped that this will make the process of obtaining the relief easier and increase overall awareness of the scheme.
The consultation is welcome but this is not the first time the problem of the ‘equity gap' has tried to be addressed. We will have to wait to see what comes out of the consultation process as to whether real improvements can be made.
Contact us
If you would like to discuss any issues surrounding the Budget 2008, please contact one of our specialists.
