In his ‘mini’Budget new Chancellor of the Exchequer Kwasi Kwarteng announced a focus on investment in the country including in innovation and early-stage companies through VCT, EIS and SEIS.
The Chancellor growth plans include extending the tax benefits of the Venture Capital Trust (VCT) Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) beyond the current deadlines of 2025.
The sunset clause, whereby VCTs were due to lose their upfront 30% income tax relief from 6 April 2025, are not expected to happen on that date. Further details are awaited from the Treasury.
In addition, from April 2023, the amount companies can raise through SEIS will increase to £250,000 and the annual investor limit will be doubled to £200,000
Andrew Aldridge, partner at Deepbridge Capital, said: “The new Chancellor’s overt commitment to the Enterprise Investment Scheme could well be the single most important decision he takes during his time at 11 Downing Street. These world-class propositions are fundamental to the creation of the innovative companies of tomorrow.
“Particularly within our specialist sectors of disruptive technology and life sciences, EIS and SEIS are key in ensuring the UK is globally recognised as one of the best places to start and scale business.”
Nick Morgan, partner at Foresight, concurred: ” “We welcome the announcement. This will remove uncertainty on the future of these important schemes not only for our investors and their financial advisers, but also for the entrepreneurs and smaller companies who drive growth in the economy with significant help from these schemes.
“This recognition of the hugely important role that VCT and EIS investments play in supporting early-stage businesses will have a positive impact on market sentiment, and allow companies continued access to the all-important equity finance they need to achieve their goals.”
John Glencross, CEO and Co-Founder of Calculus Capital, said: “It’s the most supportive budget for entrepreneurs in over a generation. The speed with which the Chancellor has moved to reaffirm the continuation of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) shows strong support for the innovators and gamechangers who can grow and scale the UK’s businesses of the future.
“This focus should enable more investors to continue to gain access to the diversified, strong performing and tax efficient nature of VCTs and the EIS in the future.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said the Chancellor’s announcement was “A strong vote of confidence in VCTs and we applaud the government’s intention to continue the scheme beyond 2025.
“VCTs provide scale-up finance for growing businesses and are fully aligned with the government’s drive for growth, creating jobs, funding innovation and boosting exports. We look forward to clarification of how the government will remove the existing uncertainty surrounding the scheme.”
The AIC has been actively seeking the removal of the so-called ‘sunset clause’, which would have ended the upfront 30% income tax relief for VCT investors from 6 April 2025.
VCT, EIS and SEIS investments are considered high risk as they are focussed on early-stage companies, not all of which will succeed.
