Private clients received a mix of good and bad news in the Chancellor’s Autumn Statement. We will get the bad news out of the way early and focus on the positive; the capital gains tax annual exemption is to be frozen and not increased in April 2012. The tax cost to individuals will be a couple of hundred pounds or so, but it is very rare for the allowance not to go up with inflation. It begs the question as to whether George Osborne might be Gordon Brown in disguise – surely we have all had enough of stealth taxes and fiscal drag ?
The really positive news is a further encouragement for venture capital and a solid recognition of its importance for the economy.
- Subtle but important technical changes have been made to the way that the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) work.
- A new form of EIS is being introduced for start-up companies; which offers 50% income tax relief.
The tax reliefs for investment in venture capital are staggeringly good now, as set out on our more detailed note. Of course the reliefs are there because the investments might be risky; but:
- Quoted investments have plenty of volatility these days;
- There are many really good small businesses starved of conventional finance;
- Heavily structured EIS & VCT products exist from well-established providers.
Last, but not least, it can be interesting and rewarding to support smaller businesses. Often the seasoned investor has an opportunity to add experience as well as cash; all with big tax incentives to cushion the downside and sweeten the upside.