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Autumn Budget 2017 – EISA Update

REVISED BUDGET UPDATE – YOU MAY WISH TO PAY PARTICULAR ATTENTION TO ANNEX A OF THE CONSULTATION REPSONSE WHICH COVERS THE NEW PRINCIPLES BASED APPROACH (LINK BELOW)

The tax changes announced in the Budget today are:

From April 2018 and in line with State aid rules:

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 annex to the consultation response. Draft guidance will be published by HMRC alongside the draft publication of the Finance Bill.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:

The government will change the Entrepreneurs’ Relief rules to ensure that entrepreneurs are not discouraged from seeking external investment

Mark Brownridge
EISA Director General