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Simplification of the rules
The measures announced aim to simplify the rules of the schemes making them easier for companies, VCTs and investors to use.
Proposed amendments:
For EIS:
- Relax the rules defining when a person is connected to a company through an interest in its capital by disregarding loan capital;
- Widen the definition of shares which qualify for relief, which includes shares to carry a preferential right to a dividend; and
- Remove the £500 minimum investment limit;
These changes will apply to shares issued on or after 6 April 2012.
For VCT:
- Remove the £1 million limit for VCT investment by companies not in partnership.
This change will apply to shares issued on or after 1 April 2012.
Increase to EIS thresholds
Proposed amendments to increase:
- Employee limit to fewer than 250 employees (currently 50 employees);
- The size threshold to gross assets of no more than £15 million before investment and £16 million after (currently £7m and £8m respectively); and
- The maximum amount that can be invested in an individual company, to £5 million (currently £1m)
Subject to approval, these changes will apply to shares in investee companies that are issued on or after 6 April 2012.
Legislation will also increase the annual amount that an individual can invest under the EIS to £1 million and will apply from the 2012-13 tax year.
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