Julian Hickman (pictured), partner, Longbow Capital, a venture investor firm supporting British healthcare, well-being and life science innovation, comments on EIS and VCT in the UK’s June Budget.
We are disappointed by the bland statement regarding EIS and VCT in the Budget, which amounts to little more than procedural clarification over EU harmonisation proposals already announced earlier this year. They have published an impact assessment of the changes but these play no real favours for the industry – the rules were already in the pipeline. Of more impact would have been to broaden the type of businesses that can benefit venture investments and simplify the over complex tax rules.
Clearly the government has decided not to do anything at the moment to support innovation through tax- efficient investment. However, the Chancellor committed to consult with business over the Dyson Review, which included recommendations for financing high-tech start ups, and a government guaranteed business loan scheme to encourage more lending by banks to innovative businesses.
The silver lining for the industry, though, is that given the immediate rise in the CGT rate to 28%, we anticipate a swift increase in interest in the Enterprise Investment Scheme. Investors will be keen to know how they can reduce yet another increase in their personal taxation, whilst at the same time contributing to driving innovative British companies forward.
Although not mentioned, we hope that the government will continue with the proposal announced in March to work with industry to increase the employee limit to either 100 or 250 employees; the gross assets limit to £15 million before the investment, and £16 million after; and the annual investment limit to £5 million for qualifying companies.
