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Angel investors in small businesses will receive a £100m tax break to back growing UK companies
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Brussels has cleared the Government to expand the Enterprise Investment Scheme (EIS) by increasing the rate of tax relief available from 20pc to 30pc and doubling the annual investor limit to £1m.
The Treasury hopes the tax breaks will encourage greater investment in some of the UK’s fast-growing, smaller companies. Since the EIS was established in the 1990s it has supported, along with venture capital trusts, more than £11bn of investment, Treasury figures show.
In 2008, the EIS helped raise £500m for 1,800 small businesses, including 500 hi-tech companies and hundreds of business services and manufacturing firms.
The Treasury is keen to encourage angel investors because they typically support high growth companies creating innovative new products and jobs. It hopes the measures will increase the amount of investment directed at the high-growth small business sector.
The Chancellor George Osborne said: “We want to make the UK the best place to start, finance and grow a business. These changes will guive a bigger tax break to thise who take risks for growth and jobs in Britain by investing in the small businesses that have the potential to be fast growing.”
Under the EIS, angel investors can benefit from a range of income and capital gains tax reliefs when they subscribe for shares in a venture capital trust or other qualifying company.
The measure was unveiled in the Budget, and a £100m annual cost declared, but the European Commission has only just give the scheme state aid approval.
The increase in the rate in being back dated for investments made since April this year, and the doubling of the investor limit comes into effect next April.
The Coalition is under pressure to improve the access to financing for small businesses amid continuing complaints the Britain’s banks are still failing to lend. Under the Project Merlin agreement, Britain’s banks agreed to lend a total of £190bn to small firms this year.
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