MP Signals Positive Changes to Tax-Efficient Investments in Budget

  • On November 10, 2017
  • By GrowthInvest Admin

Conservative MP and member of the Treasury Select Committee Chris Philp has signalled that tax-efficient investment schemes like VCTs and EISs could receive a boost in the Budget on 22 November.

At the Growth Investor annual awards the MP told attendees, who were largely made up of venture capital trust (VCT), enterprise investment scheme (EIS) and seed EIS sector representatives, that the government recognised that start-up and growth capital “is not nearly as readily available as it should be.

“I believe there are opportunities to widen the scope of VCT and EIS and seed EIS, so keep a look out on 22 November,” he said.

He added: “But, at the same time, where there are very low-risk or asset-backed investments [we need to make sure] those don’t unfairly benefit from what are supposed to be tax-relief schemes for risk capital.”

Philp also praised the 2012 changes the government made to tax-efficient schemes, saying they “rightly expanded the scope of VCT and EIS schemes that lead to much higher investment in the sectors.”

The 2012 changes involved a qualifying company having fewer than 250 employees, rather than the previous 50 for EIS and VCT, and no more than £15m gross assets, rather than the previous £7m.

The maximum amount an investee company can raise in a 12 month period was raised to £10m (up from £2m) for EIS and VCT, and the annual amount an investor can subscribe under the EIS is £1m (formerly £500,000).

Despite Philp’s indications however, there have been murmurings across the tax-efficient sector in recent months that the Treasury would tighten the rules surrounding EIS in the Budget.

Tax-efficient schemes saw a drop in investment for the first time in five years in 2015/16, down 2% from 2014/15, although the £1.89bn raised in the most recent tax year was still the second-highest amount invested into the schemes since they were launched 24 years ago.

‘Need To Do More’

The MP for South Croydon, who was an entrepreneur himself in a previous, non-political life, also said: “I think we need to do more to foster a culture of entrepreneurship. Success should be admired and something to be emulated.

“The government does have a role to play. We must create an environment where enterprise can flourish.”

The Budget will also see the results, and possibly remedies, of the Patient Capital Review.

The review looked at how growth was generated and innovation fostered, with the aim of establishing a financial framework to encourage businesses to remain in the UK and scale up to become large, global companies, LGBR Capital’s Jack Rose summarised for Professional Adviser earlier this year.

Within this remit, the review assessed government legislation designed to promote and encourage funding for smaller companies, which includes EISs, VCTs and business relief.

Source: Professional Adviser

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