Focus on ‘knowledge intensive’ investments

Chancellor of the Exchequer Philip Hammond’s rule changes to tax-efficient investments are set to receive Royal Assent through the Finance Bill as early as 8 March, according to the Financial Times.

Last November’s Budget, which coincided with the government’s response to the Patient Capital Review, will see the introduction of the new ‘principles-based’ test on tax-efficient investments.

This is intended to focus investment towards so-called ‘knowledge-intensive’ businesses and those seeking long-term growth, rather than low-risk capital preservation companies.

From Royal Assent of the Finance Bill 2017/18, the test will be introduced to reduce the scope for, and redirect, low-risk investment, together unlocking an expected £7bn-plus of new investment in high-growth firms through Enterprise Investment Schemes (EIS) and venture capital trusts (VCTs), the Treasury has previously said.

EIS Assocation director general Mark Brownridge told the FT March 8 would be “D-day” and would “bring the shutters down” on asset-backed deals.

The Treasury also increased the annual EIS investment limits for investors to £2m – as long as monies invested above £1m were in those knowledge-intensive companies.

According to the latest statistics from HM Revenue & Customs, £1.89bn was raised through EIS in the 2015/16 tax year.

Deepbridge Capital head of marketing Andrew Aldridge said: “With the Chancellor increasing the speed with which ‘knowledge intensive’ companies can receive EIS funding, and by increasing the annual limit that individual investors can invest in to such companies, he is seeking to bridge the recognised gap between start-up funding and scale-up funding.

“In effect, with the Finance Bill receiving Royal Assent, the EIS sector is being returned to how it was originally envisaged and these reforms should ensure EIS remains the envy of the world and UK investors should be delighted the Chancellor has emphasised his ongoing support for the scheme.”.

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Source: Professional Adviser



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