On Budget Day I sat scratching my head wondering what the point of another entrepreneurs’ relief type regime was for. I am sometimes slow, but I soon got it. The EC enforced changes to the EIS regime has meant that many companies that could attract investors through EIS now cannot – if they are too old or don’t meet the other qualifying criteria. This is the plug to fit that hole.

Effectively we have a mix of ER and EIS. I’ve seen former FC tax partner Kevin Slevin say that the legislation is straight forward and easy to understand, but a mix of ER and EIS sounds like hell to me!

So what’s involved? Well the basics are:

• The investor cannot be a director, employee or be connected with one

• The shares must be subscribed for (not acquired from a third party)

• The shares must be subscribed for after 16 March 2016, and held for at least three years from 6 April 2016 before disposal

• The company is not ‘listed’ and has been trading (or a holding company of a trading group) throughout the three years

• The shares are ordinary shares

• There is a lifetime allowance of £10m

• The rate of CGT on disposal will be 10%

• There are EIS like anti-avoidance provisions where investors are trying to extract existing capital to reinject it and get previously unavailable relief

There does not appear to be a 5% minimum requirement – so that means employees who hold less than 5% in a company they work for will have access to neither ER or investor relief.

Along with EIS and ER this is yet another area where advisers and taxpayers alike will trip up. The range of qualifying conditions and criteria, and the potential difference in terms of liability on bigger transactions means that extreme care will be needed to ensure that all the correct steps are taken (or not) to ensure that relief is preserved.

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