Spring Statement: Govt launches consultation on venture capital funding

Emerging-Market-Growth-Growing-General-700x450.jpgThe Government has launched a consultation into how venture capital scheme investment in start-up companies can be structured.

A document published today on the Treasury website is a follow up to the patient capital action plan published in the Autumn Budget last year.

Then, Chancellor Philip Hammond said the Government aims to unlock £20bn of new investment in UK scale-up businesses.

As part of the Patient Capital Review, the Government wants to understand how the introduction of a new approved fund structure within the Enterprise Investment Scheme can work.

This consultation outlines and seeks views on possible elements and constraints of such a fund structure.

It also seeks to better understand the capital requirements of innovative knowledge-intensive companies.

The consultation explains that the Government does not intend to introduce a new scheme, and envisages any new fund model as building on the existing EIS rules.

Similarly it does not plan to change the requirement that all EIS investment must be equity investment in ordinary shares, or to reduce the three-year holding period that applies to EIS investments.

The consultation adds any new fund model would need to focus on investing nearly entirely in knowledge-intensive companies, such as those technology companies, and those conducting high levels of research and development.

However, it does acknowledge it is possible that a small proportion of investments, possibly 10 to 20 per cent, could be in non-knowledge intensive EIS companies.

The consultation continues: “The Government anticipates that any new knowledge-intensive fund would be subject to HMRC approval.

“This would place a compliance obligation on fund managers, although the precise extent of this would depend on the incentives attaching to the fund and the way in which tax relief is given.”

The consultation closes on 11 May 2018.

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