Four trade bodies have started lobbying the European Commission on the new rules for venture capital trusts, enterprise investment schemes and seed enterprise investment schemes announced by the UK government in 2015.
The Association of Investment Companies, the British Venture Capital Association and the Enterprise Investment Scheme Association and the UK Business Angels Association have all confirmed to FTAdviser they have teamed up to work together on the matter.
The new rules, which have come about following the Summer Budget and the following Autumn Statement in 2015, saw a number of changes brought in.
At the time of the Summer Budget 2015, a policy paper was released in which the government said it would, 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.
In the Autumn Statement, Chancellor George Osborne then made changes to eligible investments for venture capital schemes, confirming excluded activities for VCT, EIS and SEIS.
In November 2015 HM Treasury also confirmed its commitment to replacement capital for venture capital trusts.
Speaking to FTAdviser, Jenny Tooth, chief executive of the UK Business Angels Association, said: “We are working very hard in the UKBAA alongside the British Venture Capital Association, EISA and the AIC, which represents the VCT industry.
“As the four big trade bodies, we have formed a very strong alliance to work with government to try and soften some of those changes and to amend them so they are not so influential in the market.
“We are starting a process of lobbying the European Commission. The changes have come down to a very important issue - which is really a challenge - that the UK is the first and foremost country in the whole of Europe to bring in tax breaks.
“We brought them in in 1994 and we brought even more over the last four or five years and we have a very deep and wide system that has been incredibly encouraging to the market.
“We have the biggest market in Europe as a result of those tax breaks – it has made us uniquely capable in terms of business angel investing – there are eight other countries in Europe that have brought in tax breaks and that have very much looked at the UK system... to kick start their investing in small businesses too.”
She added one of the areas the European Commission is focusing on is they are very happy for money to go into very early stage companies less than seven years old but they are very unsupportive of companies that are taking a longer time to develop their business.
Guy Rainbird, public affairs director at the Association of Investment Companies, told FTAdviser: “Last year the EU approved the VCT scheme until 2025, which was great news for the sector.
“However, there is potential to enhance the scheme within the EU rules and the government has committed to seeking approval for VCTs to invest in replacement capital.