What does the 2017 Autumn Budget Review mean for your financial plans?
Guy Fawkes is not the only day in November when we see the sparkle of the month. November 22nd brought us the 2017 Autumn Budget Review, where the government’s new Budget regime is presented at the House of commons and establishes the economic strategy for the upcoming tax year.
The Chancellor has covered most areas important to the UK tax system. Some of the budget highlights include the abolishment of Stamp Duty Land Tax for first-time buyers for properties worth up to £300,000; personal allowance increasing to £11,850; and the VAT registration threshold frozen for two years. Advance adjustments have been made in anticipation of Brexit, with the government setting aside £3bn. Business tax and investment incentives have also remained focal throughout the budget discussions, and the results have been quite positive for investors, entrepreneurs and financial advisors alike…
Enterprise Investment Schemes (“EIS”) have received a positive momentum, showing the government’s continual support of start-up investment in the UK. The annual investment limit per individual investor will increase from £1 million to £2 million, meaning that qualifying firms will not be able to raise up to £10 mil through EIS. Additionally, older companies will also have access to the schemes, creating a more flexible approach and potentially encouraging a new variety of companies to use EIS as a way to fund raise.
Nonetheless, the change comes with stricter standards to ensure that the right companies benefit from the scheme. The changes have been placed to support ‘knowledge-intensive’ companies (“KICs”) who must meet the operating costs condition, and either the innovation condition or the skilled-employees condition.
- The “operating costs condition” – met if Research and Development (“R&D”) expense totalled 15% or more of total operating costs in one of the three years before the issue of EIS shares. Alternatively, R&D expense can amount to 10% in each of the three years before the share issue.
- The “innovation condition” is met if the company is creating intellectual property and seeks to exploit this.
- The “skilled-employees condition” is met if at least 20% of the company’s workforce has higher education qualifications and is directly involved in R&D activities.
In addition, the principles-based test has been introduced to rule out companies with low risk investment opportunity applying mainly for tax relief. There will be two parts to this test; the first part will be an assessment of whether the company has plans to grow over the long-term period, and the second part will be an assessment of how exposed the investor’s capital is.
These changes are due to be implemented on or after 06 April 2018. For further information please visit the Autumn Budget Review 2017.
As published previously, Venture Capital Schemes are used by the UK government to incentivize investments into start-ups. The Enterprise Investment Scheme offers a pathway for investors seeking to make a larger income by connecting companies who fit the criteria above, permitting them to reduce their taxes. The EIS forms part of the 4 venture capital schemes established by the government. The scheme is primarily structured for active investors who are looking to generate a larger net income by reducing their costs (see further information on gov.uk).
Amio Wealth has a steady stream of marketing leading EIS projects, focusing on cutting edge markets which demonstrate huge growth opportunities. Our EUS companies currently focus on biotech, eSports and app based platforms. These opportunities will provide potential for multiple exit routes with proven management teams who have provided high investor returns in previous companies.
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