By Julian Hickman, Partner, Longbow Capital
Commenting on EIS (Enterprise Investment Scheme) and VCT (Venture Capital Trusts) changes in yesterday’s Budget, Julian Hickman, Partner at Longbow Capital, the EIS and VCT healthcare investor, said:
“The Budget has put VCTs and EIS back where they belong and that’s at the heart of enabling private investors to get behind British innovation and allow more companies – not just start-ups - to benefit from
tax-efficient investment. Pre-Budget fears that the Chancellor would turn his back on VCTs and EIS have proved unfounded. This Budget shows the Government is seriously committed to VCTs and EISs that genuinely support British enterprise.
“EIS investments will become really attractive to investors as a result of the Chancellor’s changes. Income tax relief has now been raised to be in line with VCTs, with the amount of upfront income tax relief increasing from 20% to 30%. And the amount of investment that can attract upfront tax relief will double in 2012 from £500,000 to £1 million.
“The Chancellor has dealt a very generous hand to British companies involved in creating wealth through innovation. The number of businesses that will be able to benefit from EIS and VCTs will increase dramatically as a result of yesterday’s Budget. Under existing rules, companies with no more than 50 employees and who met a £7 million pre-money gross asset test could qualify for VCT and EIS relief. But from April 2012, this will now increase to 250 employees, with gross assets to £15m. In addition, companies will also be to take up to £10m investment a year.
“But the Chancellor has also fired a warning shot at companies that are operating outside the original intention of the schemes. He has indicated that over the next twelve months we will see rules emerge that will re-focus both EIS and VCTs to ensure they are targeted at genuine risk capital investments, which means the VCTs and EIS that have not invested in British-based innovation are likely to cease to exist.
“Taken together, these announcements are to be welcomed. They are very good news for investors, for British businesses and the economy as whole.”
To interview Julian, please call him on 07973 509357 or contact Sarah Evans-Toyne or Mel Bradley on 020 7726 6111
Longbow is a specialist investor in the unquoted life enhancement and wellbeing sector, established in 2004 and owned by its investment partners and outside members. Longbow is a founding partner of the Boots Centre for Innovation, an innovation hub based in Swansea, Wales, which works closely with early stage companies or inventors to develop pioneering products for the shelves of Boots stores.
Longbow currently manages three EIS Funds (a fourth following closure of the 2010 Longbow Approved EIS Fund) and the Longbow SIPP Venture Fund. Longbow recently launched the Longbow Growth and Income VCT. Longbow has led on investments of over £35m into 12 unquoted life science companies. The Executive Partners have combined experience of investing in over 30 unquoted technology companies with several successful exits achieved.
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