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Investment scheme tax changes

Following their consultation, HMRC has now published details of changes on the various tax favoured Investment Schemes – Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).    

A brief summary of the changes:

  • Investments will have to be made for the purpose of growing and developing the company’s trade.
  • The requirement for spend of 70% of SEIS money before any funds can be raised under EIS is being abolished.
  • A new rule is being introduced to prevent EIS and VCT money being used to acquire a business.
  • Only the first investment made by an investor will qualify for EIS relief unless either the initial acquisition was of founder shares; was made under SEIS or EIS or was made before Royal Assent.
  • Companies must raise their first EIS investment within seven years of their first commercial sale (or ten years for knowledge intensive companies).  However the limit will not apply to an investment that is equivalent to at least 50% of the company’s average turnover for the previous five years.
  • There will be a total cap on venture capital investment of £12 million per company, increased to £20 million for knowledge intensive companies.
  • Again for knowledge intensive companies only, the employee limit is increased to 499.

A knowledge intensive company is, broadly, one that is innovative and spending money on Research & Development (R&D) and must meet criteria relating to skills and ambition.

Finally, with effect from April 2015 it is proposed that the requirement for 70% of SEIS money to be spent before EIS shares can be issued should be abolished.

If you would like to discuss this further please contact Cathy Corns or your usual Mercer & Hole contact.



Date: 9th July, 2015
Author: Cathy Corns


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