Support schemes for SMEs extended to boost businesses
Posted on 14th October 2022
The Chancellor of the Exchequer has extended support schemes for SMEs in a bid to boost growth and attract the best talent.
Two schemes, the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) which offer tax breaks to individuals and investors, had sunset clauses, which meant they were due to end by 6 April 2025.
This has now been reversed and the schemes will be extended.
The move follows representations made to the Government in response to its venture capital market call for evidence report, published by the Treasury Committee on 28 April 2022.
Response to Government report
In making its response, the Institute of Chartered Accountants in England and Wales (ICAEW), the professional membership organisation for chartered accountants, said that allowing these schemes to lapse would lead to a significant gap in early-stage equity finance.
Two other schemes, the Seed Enterprise Investment Scheme (SEIS) and the Company Share Option Plan (CSOP), have had their scope and funding allowances widened.
What are the benefits?
SEIS offers tax-efficient benefits to investors in return for investment in small and early stage start-up businesses in the UK.
From 6 April 2023, the amount of investment that companies can raise is being increased from £150,000 to £250,000, while the gross asset limit is being increased to £350,000 (from £200,000).
Additionally, the limit on the age of the company’s qualifying trade is being increased from two years to three.
The annual limit on the amount of investments that an individual can make will now be doubled to £200,000 per tax year.
Investors could attract income tax relief worth £100,000 per year, plus associated capital gains reinvestment relief, provided the conditions are met. This is because the percentage of the investment on which tax relief can be claimed is 50 per cent.
From the same date, the limit on the value of shares that can be awarded to each individual employee under the CSOP scheme is being doubled to £60,000.
A CSOP allows any employee or full-time director to acquire shares in their firm and by increasing the limit, the Government believes this will support businesses in attracting and retaining the best talent in their field.
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