Small and medium sized firms are set for a major boost this spring, according to Richard Wherton, Midlands Partner at national audit, tax and advisory firm, Crowe Clark Whitehill.
It is a filter-through from last March’s Budget and sees a number of major and advantageous changes to the Enterprise Investment Scheme (EIS), which provides tax relief for individuals investing in companies which qualify.
The new rules see a big expansion in those eligible for EIS investment, and also the amount individuals can put in.
Mr Wherton said: “The government knows that if it is to get growth in the economy much of it has to come from the SME sector.
“This is a real opportunity for firms keen to expand but who may have been worried about how best to do so or whether they should take the risk in the current climate.
“Equally it is a chance for investors, business angels and others, to put money into SME companies on favourable terms.
“It is a win-win situation all round.”
Most of the changes will take effect for shares issued after April 5.
Larger businesses can now benefit because the full-time employee qualification limit has been raised from 50 to 250.
The maximum amount an individual can invest in an EIS each tax year will double from £500,000 to £1 million and the level of income tax relief available for new investments into an EIS will jump from 20 per cent to 30 per cent.
There is also a rise to £15 million from £7 million in the gross asset threshold for qualifying companies immediately before the investment and relaxation of the requirement that they must be carrying on their trade “wholly or mainly in the UK” now requiring a UK permanent establishment only.
Mr Wherton said: “Investing in SMEs generally means accepting a larger risk that things could go wrong.
“But these further incentives should see investors more willing to take on these extra challenges. And investors will also have a great deal more choice in which companies they wish to invest in under the scheme.
“More AIM-listed businesses should also now be in line for EIS investment.”
He added: “The West Midlands is well-known for the number of SME companies – these are the bedrock of the regional economy.
“These changes will in particular help local industry by stimulating enterprise and innovation. West Midlands business is very resourceful and, at a time when they remain under all sorts of pressures, this will be a fillip.
“I would urge firms who might be intrigued by the possibilities but not that familiar with EIS to seek advice.”
