New rules have been introduced today for venture capital trusts, enterprise investment schemes and seed enterprise investment schemes by chancellor George Osborne in the Summer Budget 2015.
In its policy paper released on the Budget 2015 today (8 July), the government said it will, with effect from Royal Assent to the Summer Finance Bill 2015, introduce a cap on the total investment a company may receive through the enterprise investment scheme and venture capital trusts of £20m, for knowledge intensive companies, and £12m for other qualifying companies.
The government will remove the requirement that 70 per cent of seed enterprise investment scheme money must be spent before EIS or VCT funding can be raised for qualifying investments made on or after 6 April 2015.
It will also require that all investments are made with the intention to grow and develop a business for venture capital trusts.
Alongside this it will require that all investors are ‘independent’ from the company at the time of the first share issue.
The government is also to introduce new qualifying criteria to limit relief to investment in companies that meet certain conditions, demonstrating that they are ‘knowledge intensive’ companies within ten years of their first commercial sale, and other qualifying companies within seven years of their first commercial sale.
However these rules will not apply where the investment represents more than 50 per cent of turnover averaged over the preceding five years.
The government also said it will increase the employee limit for knowledge intensive companies to 500 employees.
Alongside this it will introduce new rules to prevent EIS and VCT funds being used to acquire existing businesses, including extending the prohibition on management buyouts and share acquisitions to VCT non-qualifying holdings and VCT funds raised pre-2012.
It said it will also prevent money raised through EIS and VCT from being used to make acquisitions of existing business regardless of whether it is through share purchase or asset purchase.
Finally, the government said it will continue to monitor the use of SEIS, EIS and VCT for investments in community energy organisations benefiting from subsidies for the generation of renewable energy to ensure that support for community energy through the venture capital schemes provides good value for money for the taxpayer and is not subject to misuse.