Budget 2018 – EISA Director General Mark Brownridge Responds
An unusual Monday Budget drew far fewer surprises for EIS and SEIS than last year and that is perhaps, no bad thing.
There was a consultation response to the proposed Knowledge Intensive EIS fund which can be found here.
This announced that a new approved fund structure will go ahead as per below:
“In light of the responses to the consultation, the government has decided to take forward its proposals to introduce a new approved EIS fund structure, improving on the existing structure through:
- focusing on knowledge-intensive – a minimum of 80% of funds raised must be invested in KICs, reducing the risk of inadvertent non-compliant investment threatening approved fund status
- flexibility for managers – funds will have two years to deploy capital, with at least 50% of each raise to be invested within the first 12 months, with monies not yet invested held in cash. This improves on previous rules where 90% of each raise had to be deployed within the first 12 months
- clearer timings for tax relief – investors to be allowed to set their relief against income tax liabilities in the year before the fund closes, where previously this was only permitted in the same year the fund closes
HMRC has digitalised the certificates and paperwork associated with this investment. This has eliminated the need for signed paper documents and subsequently reduced administrative burden for all parties involved.
The new approved fund structure will be rolled out in April 2020 at the same time the current approved fund structure is withdrawn, avoiding complication”
EISA will continue to work with HMT to deliver the detail for the fund structure but it seems an encouraging and positive step forward.
There was also further Government acknowledgement that it is keen to encourage institutional investment into Patient Capital so has made it clear that DC pension schemes can invest in patient capital as part of diversified portfolio. To facilitate this investment, HM Treasury has announced a series of measures to remove barriers and support pension funds in accessing this asset class. Find out more here.
EISA will work with Government to understand how VC firms can work with DC pension funds to ensure funds are channelled to deserving high growth small businesses.
In terms of EIS and SEIS, interestingly the Government says that it ”believes the introduction of the risk to capital condition has been successful in preventing abuse and re-directing capital towards higher growth areas. Since its introduction, the overall volume of advance assurance applications for the EIS and VCT schemes has dropped by more than 15%.”
Additionally, “Operational changes were also made in the way advance assurance applications are handled and there has been a significant reduction in advance assurance waiting times for the majority of cases. More than 90% of cases are now receiving a response within 15 working days, with some larger, more complex cases taking up to 40 working days.” I’d certainly like to hear your experiences on that one!
Other than this, there was little mention of the schemes and a general recognition the changes made at the last Budget needed time to bed in and settle down before further revisions were considered.
Director General – EIS Association