Budget 2012 - Business owners
Enterprise Investments Scheme (“EIS”)
The budget confirmed that changes will be made to EIS and to Venture Capital Trusts generally making investment more attractive. The main changes are that:
- The rules defining when a person is regarded as connected to the company (and therefore ineligible for EIS income tax relief) are to be relaxed.
- The maximum annual amount that can be invested by an individual will be increased to £1m (from £0.5m).
- The definition of shares which qualify for relief will be extended (allowing possible dividend payments).
- The size of the investee company is increased to gross assets of no more than £15m before, and £16m after investments (previously £7m/£8m) and with no more than 250 employees (as opposed to 50).
In addition, the introduction of the Seed Enterprise Investment Scheme (“SEIS”) was confirmed. This is a smaller version of EIS allowing investment of up to £100,000 by an investor. However, the tax reliefs are potentially very generous with up to 50% income tax relief and 28% CGT relief on assets sold to fund the investment.
Enterprise Management Incentives
Since the abolition of taper relief, EMI Options have lost some of their attraction because the holder cannot accrue a qualifying period for entrepreneurs’ relief whilst he holds options; that qualifying period (of a minimum of one year) has to start at the point he receives shares. This will now be reversed in Finance Bill 2013 (subject to EU state aid approval). In addition, the limit on the value of shares over which options may be granted is to be raised from £120,000 to £250,000 as soon as secondary legislation can be passed.
Corporation Tax Rate
The main rate of corporation tax is reduced from 26% to 24% for the financial year from 1 April 2012.