Venture capital tax relief: where are we now?
It’s all about providing early stage finance to new, higher-risk companies, and rewarding individual investors with generous tax relief for doing so. The venture capital schemes were envisaged as time-limited, and given sunset clauses in the legislation. But the position is now changing.
The schemes comprise the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Social Investment Tax Relief(SITR) and Venture Capital Trusts (VCTs). The EIS and VCT schemes were due to expire by 6 April 2025. Instead, they have been given a longer lease of life, and in some areas, made wider in scope.
Details to note are as follows:
- SEIS benefits from increased limits from April 2023. These include increasing the amount companies can raise in SEIS investment to £250,000, and doubling the annual investor limit to £200,000. The limit on the age of the company’s qualifying trade increases from two years to three, and the gross asset limit also increases, from £200,000 to £350,000.
- EIS and VCT schemeswill now be available beyond 6 April 2025, though it is not yet clear whether a further sunset clause will apply.
- SITR is due to finish in April 2023.
- new admin: there is a new online Government Gateway service for companies to apply for advance assurance on a venture capital scheme. This is to be used for all schemes except SITR. SITR applications should still be made by email or post, with a covering letter and supporting documentation submitted. Advance assurance involves a company providing HMRC with detailed information so that it can give an opinion on its eligibility to use a venture capital scheme. If advance assurance is given, HMRC will send a statement saying the investment is likely to qualify: this can then be shown to potential investors.
Working with you
Navigating the venture capital scheme rules demands a high level of precision: shares, company and investor must all meet specific criteria for tax relief to be available. Whether you are a business interested in raising external finance, or an individual looking for tax-efficient investment, we should welcome the opportunity to look at the various options with you.