Private investor syndicate Hotbed has called on the coalition government to increase, rather than limit or scrap, tax relief for investors in small and medium-sized enterprises (SMEs) as part of the review of the tax system.
Private investor syndicate Hotbed has called on the coalition government to increase, rather than limit or scrap, tax relief for investors in small and medium-sized enterprises (SMEs) as part of the review of the tax system.
The Office of Tax Simplification, which is reviewing all tax reliefs, allowances and exemptions before next year’s Budget, has announced that benefits for investing in the Enterprise Investment Scheme (EIS) and venture capital trusts (VCTs) may be abolished or simplified in the revamp.
Hotbed chief executive Gary Robins says that, while he supports the move to streamline the tax relief system, he calls on the government to improve the financial attractiveness of the EIS and VCTs for investors. Robins adds that the schemes create large amounts of ‘vital investment’ for SMEs from high-net-worth individuals who are attracted to the current tax savings and that a change in the breaks may deter them from committing to the sector.
Analysis of HMRC data, compiled by Hotbed, shows that £692 million was invested in the EIS in 2007-08, providing more than 2,000 businesses with access to capital. The analysis also shows that 34 per cent of high-net-worth individuals who invest in VCTs make the maximum, or close to the maximum, use of tax breaks on offer.
Robins comments: ‘Together, EISs and VCTs attract around £1 billion worth of investment into SMEs. It is these kinds of companies that will be at the forefront of any private sector-led recovery, and if the government wants to maximise their ability to grow, it should ensure that EISs and VCTs emerge strengthened by the Office of Tax Simplification’s review.’
‘In fact, we would like to see savings from the abolition of other less economically productive tax benefits to raise the ceiling for investment in VCTs and EISs.’
A preliminary report outlining how 13 tax reliefs could be changed has been released this month. None of the released proposals directly impact the EIS or VCTs. The full report will be released early next year.
