Contact us

Venture capital tax reliefs were first introduced in 1994, starting with the Enterprise Investment Scheme (“EIS”), followed closely a year later by Venture Capital Trusts (“VCT”) and finally the Seed Enterprise Investment Scheme (“SEIS”) was introduced in 2012. These schemes allow investors who accept the higher risk of investing in new companies to benefit from advantageous tax treatment in order to help soften the downside risk.

Whilst there have been changes to the schemes over the years (we all know HMRC like to keep us on our toes!) it is great that the Treasury Committee has recently announced that it is looking into the effectiveness of the reliefs currently available and what options there are for any change.

The schemes have been increasing in popularity over recent years and in 2021-2022 VCTs raised £1.13 billion of investment into UK Companies. The highest year prior to this was in 2005-2006 when £779 million was raised and is a significant increase on pre-pandemic  levels of £731 million in 2018-2019. It is heartening to see such a huge growth in companies wanting investment to grow their business and even more encouraging to see investors still wanting to invest in these opportunities.

The tax breaks available for investors are significant and include relief against Income Tax (up to 50% of the amount invested, although rates vary across the different schemes), Capital Gains Tax (both exempting gains on the scheme investment and exempting/deferring otherwise chargeable gains) and Inheritance Tax (owing to Business Property Relief on the shares held). These reliefs take into account the risk investors are taking in these companies which generally are either new companies or companies branching out into new markets, whether that is a new product market or new geographical market. But while the schemes offer a hedge against the risk, these companies offer fantastic opportunities for growth and thus also for the potential return on the investment.

If you would like to know more about the tax reliefs available or to understand whether you can attract investment in your company by being able to demonstrate that your company meets the required conditions, please get in touch.

Background Gradient

Get in touch

To find out more about what we do, please get in touch.

    I am happy for Claritas Tax to get in touch with me regarding my enquiry