Autumn Budget 2017: Increased limits for investments in knowledge-intensive companies

• United Kingdom

• Tax planning and consultancy - Budget

22-11-2017

The Chancellor has announced a doubling of the annual allowance for people investing in knowledge-intensive companies through the Enterprise Investment Scheme (EIS) and the annual investment those companies can receive through EIS and the Venture Capital Trust scheme (VCT). This measure forms part of the government’s response to the Patient Capital Review.

Earlier this year, Eversheds Sutherland fed into the CBI’s response to the Patient Capital Review. Along with many other respondents, we noted the importance of tax-advantaged schemes such as EIS and VCT for incentivising investment in innovative start-up companies. The Chancellor’s announcement demonstrates a welcome commitment to home-grown technology and innovation.

In summary, we understand that the government will legislate in the Finance Bill 2017-18 to:

• double the limit on the amount an individual may invest under the EIS in a tax year to £2 million (from the current limit of £1 million), provided any amount over £1 million is invested in one or more knowledge-intensive company;
• raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million; and
• allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.

The proposed changes will have effect from April 2018. We expect to see draft legislation on these measures published in early December.

Please view our dedicated Autumn Budget 2017 hub here. It will give you access to our watch list, our contributors and relevant articles and tweets.

www.eversheds-sutherland.com/autumnbudget

Subscribe to get tax legal updates and briefings