EIS and VCTs are designed to encourage private individuals to invest in smaller unquoted trading companies which may be perceived as higher risk. While the EIS requires an investment to be made directly into the shares of the company, VCTs operate by indirect investment through a mediated fund.
Currently EIS investors may be given income tax relief at 20% on their investments of up to £500,000 a year. Legislation will be introduced to increase the rate of tax relief to 30% for shares issued on or after 6 April 2011, subject to State aid approval.
Subject to State aid approval, legislation will be introduced to make the following changes to the EIS and for shares issued on or after 6 April 2012.
The thresholds for the size of the company which may benefit from both types of investment will be increased to fewer than 250 employees and £15 million gross assets before the investment.
The annual amount which can be invested in an individual company is to rise to £10 million.
The annual amount that an individual can invest through EIS is to increase to £1 million.
Internet link: Budget TIIN
Posted – 21/04/2011