The Chancellor has spoken, please find below a summary of the tax changes announced in the Budget today. We will be providing some industry commentary and reaction later today and tomorrow.


From April 2018 and in line with State aid rules:

  • The annual investment limit for Enterprise Investment Scheme (EIS) investors will be doubled from £1 million to £2 million, provided that any amount above £1 million is invested in knowledge-intensive companies.
  • The annual investment limit for knowledge-intensive firms will be doubled from £5 million to £10 million through the EIS and by Venture Capital Trusts (VCTs).
  • Greater flexibility will be provided for knowledge-intensive companies over how the age limit is applied for when a company must receive its first investment through the schemes. Knowledge-intensive companies will be able to choose whether to use the current test of the date of first commercial sale or the point at which turnover reached £200,000 to determine when the 10-year period has begun.
  • A new knowledge-intensive EIS approved fund structure will be consulted upon, with further incentives provided to attract investment.

From Royal Assent of Finance Bill 2017-18, a principles-based test will be introduced into the tax-advantaged venture capital schemes. The new test will ensure that the schemes are focused towards investment in companies seeking investment for their long-term growth and development. The new test will not affect independent, entrepreneurial companies seeking to expand. Tax-motivated investments, where the tax relief provides all or most of the return for an investor with limited risk to the original investment (i.e. preserving an investors’ capital) will no longer be eligible. The government has published a note explaining how the test will work, as an annexe to the consultation response. The draft guidance will be published by HMRC alongside the draft publication of the Finance Bill.


Changes will be made to the Venture Capital Trust (VCT) scheme rules:

  • From 6 April 2018 certain historic rules that provide more favourable conditions for some VCTs (“grandfathered” provisions) will be removed
  • From 6 April 2018, VCTs will be required to invest at least 30% of funds raised in qualifying holdings within 12 months after the end of the accounting period
  • From Royal Assent of the Finance Bill, a new-anti abuse rule will be introduced to prevent loans being used to preserve and return equity capital to investors. Loans will have to be unsecured and will be assessed on a principled basis. Safe harbour rules will provide certainty to VCTs using debt investments that return no more than 10% on average over a five year period.
  • With effect on and after 6 April 2019, the percentage of funds VCTs must hold in qualifying holdings will increase to 80% from 70%
  • With effect on and after 6 April 2019, the period VCTs have to reinvest gains will be doubled from 6 months to 12 months
  • The government will change the Entrepreneurs’ Relief rules to ensure that entrepreneurs are not discouraged from seeking external investment



020 7071 3945


Throughout our site you will find links to external websites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers.