The Chancellor intends to double the annual allowance (from £1m to £2m) for people investing in knowledge-intensive companies through the enterprise investment scheme (EIS) and the annual investment those companies can receive through EIS and the venture capital trust (VCT) scheme, and will introduce a new test to reduce the scope for – and redirect – low-risk investment. We expect further details in the Finance Bill due to be issued on 1 December 2017.
For VCTs, from the date of Royal Assent, VCTs may no longer offer secured loans to investee companies, and any returns on loan capital above 10% must represent no more than a commercial return on the principal.
From 6 April 2018, previous ‘grandfathering’ provisions will no longer apply to new investments made by VCTs. VCTs will also be required to invest 30% of the funds raised in any accounting period beginning on or after 6 April 2018 in qualifying holdings within 12 months after the end of the accounting period.
Finally, from 6 April 2019, the period for reinvestment of gains on disposal of qualifying holdings investments will increase from six to 12 months. At the same time, the proportion of VCT funds that must be held in qualifying holdings will increase from 70% to 80%.