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EIS and VCT schemes face cuts under new tax rules

InvestmentInvestors will be shut out from receiving tax breaks through some of the lowest-risk forms of enterprise investment schemes and venture capital trusts, under new rules expected to be introduced this month.

According to the Financial Times, rules in the Finance Bill, which is expected to receive Royal Assent as early as 8 March, will “close the door” on investing in some of the lowest-risk schemes caught within the current rules/

EIS and VCT funds offer a 30 per cent tax break to investors who will back start-up businesses which are often high-risk in their infancy.

Picking apart Hammond’s changes to VCTs

The new bill will introduce a “risk-to-capital” condition that is unlikely to be met by the safer end of EIS and VCT investments.

According to the FT, EIS funds that invest in pub chains, films, storage facilities and crematoria are likely to be targeted by the new rules.

Chancellor Philip Hammond signalled he wanted to crack down on EIS and VCT schemes in the 2017 Budget.

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