The investment limit for investors using the Enterprise Investment Scheme (EIS) is to be doubled as part of the Budget 2017, accompanied by a strict set of rules to ensure it’s not used for low-risk assets.
30% tax relief is earned on EIS investments and around 4,000 investors are expected to benefit from the rise, according to the Treasury. From 6th April 2018, individual investors may earn a maximum of £600,000 in tax relief, which is twice the current limit.
The general consensus before the Budget was announced was that EIS and Venture Capital Trusts would be mentioned by the Chancellor when it came to reductions in tax relief, so the statement came as quite a surprise.
Chief Executive and Founder of the broker, Wealth Club, Alex Davies, said: “Unexpectedly, this has been a very good Budget for VCT and EIS investors. It rewards entrepreneurial companies and investors who are prepared to take some risk to support British business.”
As part of the government’s patient capital review, a consultation paper revealed a £4 billion gap in funding between US and UK firms, and so this move is part of a wider plan to stimulate growth in new business. This is made all the more important by the current uncertainty around UK businesses’ global positions post-Brexit..
The maximum investment in EIS schemes will go up from £1 million to £2 million, on the proviso that investment is made into “knowledge-intensive” companies, said the Chancellor, Philip Hammond. This increase is thought to add an extra £7 billion to the total amount promised to burgeoning companies in the UK.
The government will also begin to reduce the funding of low-risk assets to deter investors from putting money into them as a method of cutting down tax-efficient schemes, instead of the higher risk enterprises the scheme is designed for.
Alex Davies continues: “Whilst there will be restrictions on some capital preservation-focused products, investments made in the spirit of EIS will benefit burgeoning business and their investors.”
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