Following announcements in 2011, the Government confirmed
various changes to the Enterprise Investment Scheme (EIS) and
Venture Capital Trust (VCT) rules and proposed Seed EIS (SEIS)
rules in the March 2012 Budget. These changes are a welcome
relaxation and should go some way to stimulating and boosting
investment into 'smaller' companies.
Changes to EIS and VCT rules – for shares issued on
or after 6 April 2012
The following changes are subject to State Aid approval:
employee limit for investee companies increased to fewer than
250 full-time employees
size threshold for the gross assets test for investee companies
increased to no more than £15m immediately before investment,
and £16m immediately thereafter
maximum annual amount that can be invested in a company through
the EIS and from VCTs in aggregate in any 12-month period increased
The amount that an individual can invest per tax year in EIS
shares has been increased to £1m from 6 April 2012.
Other changes include:
clarification that investors are disqualified from claiming EIS
income tax relief if, together with associates, their shareholding
or voting power exceeds 30%
replicating the definition of eligible shares for EIS purposes
to that used for VCTs with respect to certain preferential rights
in relation to dividends
shares issued in connection with 'disqualifying
arrangements' will not attract EIS or VCT relief
tax relief will also not be available under EIS or from VCTs
where funds raised by a share issue are to be used to acquire
shares in another company
removing the £1m per annum limit on investment by a VCT
in a single company (except for companies in a partnership or a
removing the £500 minimum investment limit for EIS
After consultation on the initial SEIS proposals, the following
changes have been incorporated to this relief (available for
investments made on or after 6 April 2012) for certain investors
investing in a company or a group with gross assets not exceeding
£200,000 prior to SEIS investment:
companies can qualify even if they have subsidiaries
eligibility is determined by reference to the age of the trade,
rather than the company
the reference to holdings of other entities in calculating
asset and employee tests has been removed
past (but not current) employees qualify for relief
directors who qualify under SEIS continue to qualify under EIS
(provided the EIS shares are issued before the third anniversary of
the date of issue of SEIS shares).
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