Autumn Statement: Osborne launches new EIS scheme

Chancellor George Osborne has unveiled a new enterprise investment scheme (EIS), giving investors 50% tax relief for investing in business start-ups.

Investors will be given 50% income tax relief on investments of up to £100,000 in new enterprises, with each company eligible for £150,000 of investment in total.

The scheme will also include a capital gains tax holiday for the first 12 months to incentivise investors to part with their cash in new businesses.

The scheme will start in April next year and will give new businesses a much needed boost in securing investment at a time when bank lending to small businesses is in steep decline.

According to the British Bankers' Association new loans to firms with a turnover of less than £1m fell by 10% in the first six months of this year.

In March's budget EIS and Venture Capital Trust (VCT) rules were widened to allow both schemes to invest in businesses with gross assets of up to £15m, up from the current level of £7m.

The rules have also been relaxed to allow schemes to pump money into a wider range of small businesses.

Previously the rules stated VCTs and EIS vehicles could invest in companies which have a maximum of 50 employees, but this has now been widened to 250.
Chancellor Osborne also announced EIS income tax relief will rise to 30% from 20% in April 2012, while the annual EIS investment limit for individuals will be raised to £1m."

To encourage investment in new start-up companies the government will launch a new Seed Enterprise Investment Scheme (SEIS) from April 2012, offering 50% income tax relief on investments," said Osborne.

"This will offer a capital gains tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year."