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Autumn Statement: tax relief on business investments

Government scraps £1 million VCT limit

VCT and EIS rule relaxation

Rules on investing in smaller businesses have been relaxed to help promote growth

The government will increase tax rewards for investors putting money into start up businesses, by extending its Enterprise Investment Scheme, which helps small firms access the necessary funding to get off the ground. The Chancellor George Osborne announced this in his Autumn Statement today (29 November). 

In April 2012, the Seed Enterprise Investment Scheme (SEIS) will launch, with those investing up to £100,000 in shares in a qualifying start up business entitled to income tax relief of 50%, regardless of the tax rate they pay.

The Chancellor George Osborne also announced that investors would not have to pay tax on capital gains realised in 2012-13 and then invested through SEIS in the same year.

Rate relief holiday extended

Start-up companies are entitled to £150,000 in cumulative annual investment, under the terms of the scheme, which will be funded with money made available to the Government by freezing the capital gains threshold at £10,600 for 2012-13.

In another move to promote growth, the ‘rate relief holiday’, which exempts small firms from business rates, has been extended from October 2012 to April 2013.

In March 2011, the government had lifted tax relief to 30% for investors in Enterprise Investment Schemes (EIS), which are designed to support smaller, start up companies with tax benefits for the people funding them.

New VCT rules

Today’s Autumn Statement also set out new rules to simplify and refocus the existing EISs and Venture Capital Trusts (VCTs).

It has scrapped the £1 million investment limit per company for VCTs, to reduce the administrative burden. VCT tax relief remains at 30%.

It has also simplified its EIS by relaxing the connected person rules and the definition of shares that qualify for relief. There will be a new test introduced to stop companies being set up specifically to receive the tax relief.

Watch the Which? Autumn Statement liveblog again

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