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Treasury mulls EIS crackdown

The Government is looking at ways to stop high earners abusing the tax relief offered by Enterprise Investment Schemes, according to reports.

The Sunday Times reports that the tax-breaks for funding start-ups are being reviewed as part of a wider look at smaller business funding.

The relief targeted at investments in high-risk companies could be reduced, the necessary investment period could be increased above the current three years, or the pool of qualifying companies could be narrowed, sources tell the paper, which says that the results of these considerations may feature in November’s Budget.

Sources tell the paper that relief is unlikely to be removed entirely, though the wider rules could be rightened.

The Treasury declined to comment.

Currently, only companies with assets under £15m qualify for EIS funding, and can receive up to £5m a year in investment. An estimated £15.9bn has been invested in the schemes since the EIS was launched in 1994.

For those companies less than two years old, a separate Seed Enterprise Investment Scheme was opened five years ago, raising around £178m last year.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. How can high earners abuse tax reliefs granted by the Government itself? If you follow that logic then VCTs,ISAs, pensions and everything with a tax advantage are all abuses of the tax system.

    As I have found personally, high earners have to accept the losses that go with these investments, it is not a one way ticket to riches and tax reliefs are the compensation for that risk when helping start up companies.

    • Indeed. It might be useful to see some examples of these alleged abuses, given that all (I think) EIS’s have to be granted qualifying status for the relevant reliefs to be allowed and it’s HMRC that grants it.

      Just because HMRC is considering tightening the criteria on which it grants QS doesn’t necessarily mean the present framework is being abused. It just means that HMRC considers that framework ~ devised by the government ~ to afford wider scope for reliefs than it’s happy with so it’s now considering making it more restrictive.

  2. I just love the way socialists think that all our money is there’s and that taking less from us, somehow makes them generous..

  3. Wouldn’t a pragmatic solution be firstly to clarify the relevant rules/legislation (with a view to minimising scope for contrived/clever engineering) and secondly to require the particulars of each and every proposed scheme to be submitted for approval prior to being marketed? Without an HMRC approval reference, it would be illegal to market and sell an EIS, much like an RPS. For its part, HMRC would have to undertake to consider and issue a verdict on schemes submitted for approval within a reasonably short time frame.

    Or is it HMRC’s intention merely to prune the EIS market so drastically as to virtually kill it off?

  4. The treasury is simply trying to cut back the tax advantage of any scheme. They have been whittling away at pensions for years now, as has already been said this is our money not theirs, but they have a license to steal.

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