Recent changes to the EIS rules could spell good news for businesses wishing to spur their growth.
The EIS is a tax-favoured scheme for investors to acquire shares in qualifying trading businesses either directly or through specialist EIS funds.
From 6 April 2012, the annual limit on the aggregate EIS and venture capital trust (VCT) funding for qualifying businesses rises from £2m to £10m. Individuals will be able to invest alongside VCTs and other investors in much larger fundraisings through the EIS, with significant tax breaks.
The number of full-time employees in a qualifying business rises from 50 to 250, and investors will be able to invest in businesses with maximum gross assets of £15m, up from the current level of £7m.
Investors can gain income tax relief of 30% on any qualifying EIS investments made and gains are free from capital gains tax (CGT) following a minimum three-year holding period. Investors looking to benefit from the scheme will be able to invest £1m per annum from April 2012 – a significant sum enabling many to invest in larger, less risky companies.
Taken together with the opportunity to use EIS to defer CGT, it appears that EIS is going mainstream.
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