“This is really only of interest to super high net worth clients. In fact, we’ve never had a client invest more than a couple of hundred thousand pounds into an EIS.”
Time will tell
Hammond promised the UK that the government would stand ready to step in to replace European Investment Fund lending if needed, in order to ensure the country remained at the front-line of innovation post-Brexit.
“There has been some concerns that some VCTs and EISs have been abusing the rules, hence the changes,” said McDermott.
“But in terms of underlying investments, the changes should be positive in that they should encourage more capital investment in companies delivering innovation and job creation.”
Phil Cook, private client partner at Thomas Miller, views the Treasury’s attempts to focus investment into specific areas and in high-risk and high growth sectors, as a positive, adding it “is important that investors are rewarded for the risks that they are willing to take in supporting smaller, high-risk companies”.
“We view the budget as being broadly positive on the basis that existing tax reliefs and holding periods for EIS are unchanged. The reliefs on income tax, capital gains tax and inheritance tax remain in place and this is an important offset to the high-risk nature of EIS where loss of capital is a realistic outcome.”
Cook explained that concern around tax reliefs on lower risk capital preservation strategy EIS does exist, albeit in previous years, this money has helped support growth in areas where the government has encouraged enterprise capital.”
According to Cook, areas such as media projects in this country are “a big tax earner for the Treasury” and “we are pleased to see that media will still be eligible for EIS status even if some of the pre-contracted arrangements will no longer qualify”.
“Whether doubling of the EIS allowance for knowledge intensive companies will help raise further capital is questionable as most investments in EIS are relatively small and individuals may already invest £2m using carry back to a previous tax year. Only time will tell if this measure actually leads to further investment.”
