The government has confirmed that it continues to support the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) scheme by announcing that both schemes will be extended by ten years to 5 April 2035, as planned.
- The two highly popular business investment schemes, the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) were originally due to end on 6 April 2025.
- The previous government announced in a policy paper last Autumn that they would be extended into 2035.
- The new government has now confirmed its commitment to the reliefs and their extension in a written ministerial statement.
- It appears that there may be some tweaks to the rules: investors will be able to claim loss relief through the EIS as long as shares are held for at least two years
According to a press release from HM Treasury, "Both schemes have already seen significant success with over £41 billion raised through the schemes since the EIS was launched in 1994. The schemes continue to generate vast amounts of investment, with £2.9 billion of funds raised across the schemes in 2022-23 and 1,280 companies using the EIS for the first time over this period."
Venture capital organisations also seem pleased with the British Private Equity and Venture Capital Association (BVCA) Chief Executive Michael Moore saying, “It is excellent news that the government is moving so quickly. This means that investors can now focus on what they do best, investing, safe in the knowledge that these schemes now have the long-term security needed to drive investor confidence."
Richard Stone, Chief Executive of the Association of Investment Companies, added, “VCTs invest in the UK’s most exciting early-stage companies. They help entrepreneurs transform their businesses. Extending the VCT scheme until 2035 will allow the sector to raise further capital and invest with confidence."
The Treasury has made regulations to bring this into effect which have come into force.
The Enterprise Investment Scheme (EIS) provides tax incentives in the form of a variety of Income Tax and Capital Gains Tax (CGT) reliefs to investors who invest in smaller, unquoted, trading companies.
- Income Tax relief is at 30% on the cost of new EIS share investments.
- No CGT is charged on any gain on EIS shares disposed of after the minimum holding period on which Income Tax relief was given and not withdrawn.
- CGT on the disposal of other assets can be deferred if capital proceeds are invested in EIS shares
In its lifetime a company can raise up to £12 million from VCT investment.
Individuals investing in VCTs can benefit from:
- Income Tax relief, given ‘front-end’ at 30% on an investment of up to £200,000 per year.
- Investment in shares in a VCT: shares must be retained for a minimum holding period of at least five years.
Useful guides on this topic
EIS: Enterprise Investment Scheme (Subscriber guide)
Practical issues for advisers. When can EIS relief be claimed? What are the conditions for EIS relief? What are the benefits of EIS relief?
Venture Capital Trusts (VCTs)
What's a Venture Capital Trust (VCT)? It is a company approved by HMRC that invests in or lends money to, unlisted companies. Individuals may invest in a VCT: this may spread investment risk, as opposed to directly investing in an unlisted company.
Which investment relief: IR, BADR, SEIS or EIS?
A guide for individual investors: What is the difference between Business Asset Disposal Relief (BADR) and Investors' Relief? How do they compare to investments in the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)?
