The government is to launch Seed Enterprise Investment Schemes (Seis) which will offer 50 per cent income tax relief on investments into new start-up companies. If you incur any capital gains tax (CGT) from the disposal of an asset in the 2012-2013 tax year, and reinvest your gains in a Seis, you will not have to pay the CGT. The scheme will start from April 2012 with an annual maximum investment of up to £100,000, while companies can invest up to £150,000.
"This could provide up-front tax relief totalling 78 per cent for investments made during the year to 5 April 2013," said Toby Ryland, tax partner at accountants Blick Rothenberg. "Private investors will welcome the £50,000 income tax reduction and may look to invest in a scheme as an alternative to traditional pensions for one year only. You cannot invest more than £50,000 a year into a pension and you would not get any CGT relief if you reinvested a gain into a pension." The CGT annual exempt allowance is to be frozen at £10,600 for 2012-2013.
Meanwhile, the connected-person rule on investments into Enterprise Investment Schemes (EIS), which offers investors 30 per cent income tax relief on their investments, is to be relaxed. This is likely to mean that directors and chairmen will be able to invest in their own companies via EIS and benefit from the various tax reliefs these vehicles offer. The types of shares EIS can hold will also be increased, enhancing their investment powers.
The £1m investment limit per company per year for venture capital trusts (VCTs) is to be removed. This has prevented individual VCTs from providing all the funds a small company might require in one year. "This could transform the VCT sector," said Ian Sayers, director general of the Association of Investment Companies (AIC). "Removing this limit will mean individual VCTs can invest more efficiently, grow in size and secure economies of scale."
But eligibility tests will be introduced to prevent VCTs and EIS being set up purely for the purpose of accessing tax relief. "The new test will ensure capital goes to where it is needed most - businesses which are genuinely creating jobs and growth," said David Mott, investment director at EIS provider Oxford Capital Partners.
