EIS’s, VCT’s & BPR

You may be aware that the Treasury have conducted a Patient Capital Review, including EIS’s, VCT’s & BPR. The impact of this will be heard in the Autumn statement on 22nd November. Many experts in this area are convinced that, following the Autumn Statement, stricter criteria will apply when investment schemes attempt to obtain Advance Assurance from HMRC.

It is apparent that the Treasury don’t like giving tax relief to investors in a scheme that contains little risk. They do however like investments that can show significant growth potential, and/or be technology based, and/or show innovation.

The following is a list of areas the Treasury don’t like providing EIS tax reliefs for, and these schemes might therefore not achieve EIS qualifying status after 22nd November:

Asset backed investments

Tax credits (HMRC may view this as “double dipping” for tax relief purposes)

Investments without significant growth potential

Capital preservation schemes

Predictable and/or cautious returns

Income producing assets

Pre sales of, for example, broadcasting rights in Film/TV EIS’s

The upshot of this is that, whilst it is very unlikely any changes will be retrospective for previous schemes which have received Advance Assurance from HMRC, future approvals will probably be harder to obtain. This means that individual investors into EIS’s will need to have a higher more speculative risk profile.