The EIS industry has described today’s Autumn Budget as a “huge vote of confidence” in the scheme.
The EIS Association had feared changes to tax reliefs or holding periods plus exclusions for certain sectors, but says it pushed hard with HM Treasury to reconsider on the possibility of wide-ranging changes.
But Chancellor Philip Hammond today announced that tax relief limits for EIS would double to £2m for knowledge-intensive companies.
EISA director-general Mark Brownridge says the budget is a “huge vote of confidence from the government” and that the government had recognised the power of the tax-advantageous scheme to help companies start-up and grow.
Wealth Club chief executive Alex Davies describes the budget as “unexpectedly very good” for EIS investors, as well as for VCTs, and that changes to pensions mean it is only going to grow in popularity.
Brownridge says he understands that HMRC will put an end to backlogs in the application system for eligibility Advance Assurance, which companies apply for to ensure they can receive EIS investment. HMRC will commit to process these requests in 15 days.
“All in all, at first glance, today’s budget seems to be good news for EIS and SEIS, for start-ups, growth companies and entrepreneurs, and for investors in these companies,” the EISA boss says.
Additionally, Brownridge says they are waiting for a consultation paper coming soon that would introduce a principles-based approach to assessing genuine ‘risk’ investments using a ‘reasonable person’ test.
“We see this as a sensible way forward for ensuring that EIS investment is only directed at genuine, entrepreneurial, growth businesses.”
However, TLT tax director Mark Braude does not agree, arguing the test creates uncertainty for investors. “This unwelcome new test is likely to add a further layer of complexity to what are already dense rules.”
Prudential head of technical Les Cameron warns EIS schemes are unsuitable for many investors.
“The old adage that the tax tail shouldn’t wag the investment dog should be remembered – the risk being undertaken has got to be appropriate for the client.”