Changes to venture capital scheme rules
Tue 14 Jul 2015
The consultation announced following the March 2015 Budget has led to changes to the tax rules for venture capital trusts (VCT), enterprise investment scheme (EIS) and seed enterprise investment scheme (SEIS). The changes are to be included in the Summer Finance Bill 2015 and will take effect from Royal Assent, subject to state aid approval.
The changes focus on ensuring that companies benefitting from VCS reliefs are genuinely new, fresh and preferably innovative. Hence the following requirements.
· Investments must all be made with the intention of growing and developing the company’s business.
· All investors must be ‘independent’ of the company at the time of the first share issue.
· A company must raise its first VCS or other risk finance investment within seven years of making its first commercial sale (10 years if the company is a knowledge-intensive company). This age limit will not apply if the amount of the investment is at least 50% of the company’s average annual turnover for the previous five years.
· The age limit will apply also to any business that has been owned previously by another company.
· A new lifetime total EIS and VCT investment cap of £20m will apply to knowledge intensive companies and £12m for other qualifying companies.
· For knowledge intensive companies the employee limit is increased from less than 250 to less than 500 employees.
· New rules will prevent EIS and VCT funds being used to acquire existing businesses. The existing EIS prohibition on management buyouts and share acquisitions is to be extended to:
o VCT non-qualifying holdings and VCT funds raised pre-2012;
o EIS and VCT monies being used to make acquisitions of existing business by any means, including share or asset purchase.
The requirement that 70% of SEIS money must be spent before EIS or VCT funding can be raised will be removed for qualifying investments made on or after 6 April 2015.
Comments