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UK government considers relaxing EIS rules

Venture investor Longbow Capital has welcomed the government’s announcement in the Budget that it is considering relaxing the criteria for qualifying companies in the Enterprise Investment Scheme.

In the Budget, the chancellor mooted he is considering increasing the annual investment for qualifying companies from GBP2m to GBP5m and the gross asset test from GBP8m to GBP15m before an investment and GBP16m afterwards.

It would also consider increasing the qualification limit for employees, up from 50 to 100 or 250.

Longbow Capital, a founding partner for the Boots Centre for Innovation and specialist investor in the healthcare, wellbeing and life sciences sector, says it is also pleased that the UK will not be adopting a lesser European definition of enterprises which would place greater restrictions on companies qualifying for investments within EIS.

Julian Hickman (pictured), partner at Longbow Capital, says: “We are pleased to see that the chancellor has made no material change to the Enterprise Investment Scheme and is considering significantly expanding the number of businesses that could qualify. The mooted changes are encouraging signs that will strengthen EIS and we hope they come to fruition.

“However, we are disappointed that the chancellor did not take the opportunity to simply the EIS structure, which is unnecessarily complicated. This is something we hope the next government might address as the current structure means many investors are put off from supporting enterprise and innovation through EIS.

“EIS provides a powerful combination of tax reliefs for many high net worth individuals particularly within a harsher tax regime. With forthcoming increases in higher rate tax about to hit hard, investors need all the help they can get and this is a missed opportunity for the government to spread the message.”

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