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The Government announced that the will amend the requirements for the tax-advantaged venture capital schemes – the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) to smooth some of the technical difficulties of the current rules.
Finance Bill 2017 will include amendments to :
• clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016
• provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investments made on or after 6 April 2017
• introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs
Finance (No.2 Act) 2015 changes were published for consultation in May 2016. HMRC have said that they will be considering the responses by the end of this year.
Although in 2015 the Government stated that it would consider allowing an element of replacement capital for VCT and EIS investments, it was announced that they would not be introducing flexibility for replacement capital at this time, and will instead review this over the longer term. Legislation in this area is likely to be complicated and may well require state aid approval. Legislation in this area might wait until after Brexit negotiations have been completed.
Although flexibility to help businesses scale up is desirable, it is probably not as high on the wish list as changes in relation to conversion of share capital and the advance assurance process which are very welcome.
If you wish to discuss VCT/EIS/SEIS tax reliefs in more detail please contact Sharon Collier at Enterprise Tax.
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