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Consultants to lobby for increased tax relief for EIS funds

Smith and Williamson will lobby the government for an initial income tax relief increase for EIS funds to offset the loss of capital gains tax taper relief.

Smith and Williamson director Martin Sherwood says EIS funds should be brought into line with VCT funds.

He says: “We certainly in the EIS industry will be lobbying to enhance the tax benefits of the EIS as a result of what happened on Tuesday. The obvious thing we will be asking for is an increase in the initial income tax relief, which is currently 20 per cent. I think we will be looking for that to be increased up to 30 per cent in line with VCT.”

Sherwood adds that small businesses will be hit by the changes.

He says: “The small equity industry is extremely worried by the announcement yesterday because they think it’s going to result in pure funds being raised for smaller companies. It’s also going to mean that owners of small businesses will have to pay 18 per cent capital gains tax rather than 10 per cent when they sell their business.”

Sherwood says this could cause an increased number of business owners to sell before the changes come into play.

He says: “It does seem as though there will be quite a rush to make disposals before April 5 if those disposals under the current rules give rise to a 10 per cent tax charge.”

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