.png)
.png)
Changes to tax breaks designed to promote investment in small and growing firms will deter investors from taking advantage, according to the Chartered Institute of Taxation (CIOT).
The professional body warned that new legislation creates greater complexity and denies relief to existing financiers that want to increase their investments.
Changes to tax breaks designed to promote investment in small and growing firms will deter investors from taking advantage, according to the Chartered Institute of Taxation (CIOT).
The professional body warned that new legislation creates greater complexity and denies relief to existing financiers that want to increase their investments.
Amendments to the enterprise investment scheme (EIS), seed enterprise investment scheme (SEIS) and venture capital trusts (VCTs) were announced in March’s Budget, with key requirements including that all investments be made for the purpose of “business growth and development”.
All EIS and SEIS contributors must be independent from the recipient company at the time of the first share issue (excluding founder shares); and each small or growing firm can receive no more than £15m in total from investment of any kind (while “knowledge-intensive” companies face a £20m cap).
The CIOT’s Andrew Gotch expressed concern that the reliefs were “already subject to many qualifying conditions that can deter potential investors, and further changes and restrictions will only add to the complexity.”
The expectation that investors must be independent from ‘investees’ at the time the first shares are issued may act as a disincentive by denying relief where the prospective financier already holds shares, said Gotch, who chairs the institute’s owner-managed business subcommittee.
He called for the restriction to be mitigated by a “carve-out for existing shares obtained from personal relationships and a de minimis threshold”, and criticised the phrase “business growth and development” for being “vague” and adding “little to our understanding of what the new restriction is aiming”.
Under the proposed EIS changes, the denying of relief where the prospective financier already hold shares will not apply where the shares already held qualified as a risk-scheme investment (that is EIS, SEIS or SITR).