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Home | News & events | Legal updates | EIS, VCTS AND CVS

EIS, VCTS AND CVS

07 January 2010

The Enterprise Investment Scheme (EIS), Venture Capital Trust (VCT), and Corporate Venturing Scheme (CVS) rules provide tax incentives for individuals and corporates investing in unquoted small and medium size enterprises in the UK.

The pre-Budget Report has announced a number of changes to the rules governing these schemes in order to comply with European Union ‘state aid’ rules.

The changes are:

• Replacing the current rule that requires at least 50% of a company’s qualifying activities to be in the UK with a requirement to have a permanent establishment in the UK.
• Preventing ‘enterprises in difficulty’ from being eligible for investment under the schemes.  The question of whether a company is in difficulty is to be determined in accordance with the relevant EC guidelines.
• VCTs will be required to hold at least 49% of their total funds in ‘equity’.
• Replacing the current requirement that VCTs must be listed in the UK with a requirement that their shares must be traded on an EU ‘Regulated Market’.
• Replacing the ‘Small Enterprise’ requirement. This requirement replaces the current gross assets and number of employees’ requirements. A small enterprise is defined by reference to the definition contained in the Annex to Commission Recommendation 2003/361 of 6 May 2003. The intention is to ensure that relief is targeted at smaller, higher risk businesses.

HM Revenue & Customs (HMRC) has revised its view on whether a company trading through a partnership can qualify for EIS relief, and now says such companies will not qualify, although this will not have retrospective effect. 

© Shoosmiths. This page is for general information: it is not legal advice. Please read our full terms and conditions for details of the disclaimers and exclusions which apply.

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Niall Murphy

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T: 03700 86 6778
I: +44 (0)1489 61 6778
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