Chancellor announces major new tax relief for seed stage investing
Chancellor George Osborne’s Autumn statement today announced a major new tax relief of 50% for investing in seed stage businesses called SEIS. The Chancellor announced:
The introduction of the new Seed Enterprise Investment Scheme (SEIS), commencing from April 2012, to encourage investment into new early stage companies. This is the ‘BASIS’ proposal that was set out in the consultation we carried out earlier this year. The details of the scheme are as follows:
– SEIS will be similar in design to the current Enterprise Investment Scheme (EIS) but will focus on new early stage companies which are carrying on or preparing to carry on a new business.
– SEIS will provide income tax relief of 50% for individuals who invest in shares in qualifying seed companies, with an annual investment limit for individuals of £100,000 and cumulative investment limit for companies of £150,000.
– Eligible companies will need to have 25 or fewer employees and assets of up to £200,000 at the point of investment, and must be undertaking a new business.
In order to give the new scheme a kick-start, the Chancellor also announced a one year CGT exemption for any gains made on the disposal of assets in 2012-13, and then invested through SEIS in the same year.
In addition, the Autumn Statement also includes some (brief) details of the Government’s decisions on refocusing and simplifying EIS and VCTs following the consultation earlier this summer. The Government has decided to:
• Remove the £1m limit on investment by a Venture Capital Trust (VCT) in a single company (except for companies in a partnership or a joint venture) with effect from 6 April 2012 (this was not part of the consultation, but the decision has been taken in order to simplify and help to reduce burdens associated with VCT investments).
• Simplify EIS rules as set out in the consultation document, to replicate the definition of eligible shares currently used for VCTs and to reform the connection rule regarding bridging loans.
• Tighten the focus of the schemes by introducing a new test to exclude companies set up for the purpose of accessing the relief, exclude acquisition of shares in another company and to exclude investment in Feed-in-Tariffs businesses.
Next week, the Government will publish the formal response Consultation Response Document, and draft Finance Bill 2012 legislation, which will set out in much greater detail the announcements mentioned here. The Finance Bill legislation will then be open to consultation for 12 weeks, and we would welcome your comments on this to ensure that the policy objectives set out here are supported with effective legislation.