Entrepreneurs looking for funding will have less tax advantages than before thanks to Gordon Brown’s Budget, it has been claimed.
In his ‘final’ Budget Brown unveiled changes to the rules affecting Enterprise Investment Schemes (EIS), Venture Capital Trust (VCT) and Corporate Venturing Schemes (CVS).
The new rules mean that a company raising money under the schemes must have fewer than 50 full-time employees at the date on which the relevant shares or securities are issued.
The chancellor has also brought in a new investment limit of £2m for a company to apply for EIS, CVS or VCT
However, this is not just for one investment and is the maximum combined limit for all of the schemes for the 12 months up until the shares are issued.
Elizabeth Small, a corporate tax partner at law firm Halliwells is concerned that Mr Brown might be phasing out venture capital relief by the back door.
She said: “This year's Budget introduces two new limitations: a maximum number of full time employees and a cap on fundraising from investors seeking venture capital tax relief of £2m in a rolling 12 month period.
“This coupled with last year's slashing of the gross asset test, means even fewer companies will be able to offer tax efficient investments for investors.
“Along with the announced increase in small companies’ tax rate, this will be a blow to many small and medium sized enterprises.”
© Crimson Business Ltd. 2007
