Relief for UK start-ups as vital investment schemes extended
Two vital tax efficient schemes for UK start-ups have been extended for ten more years, which may take the sting out of potential Capital Gains Tax (CGT) rises in the Budget, say leading audit, tax and business advisory firm, Blick Rothenberg.
Simon Gleeson, a Partner at the firm, said: “The announcement that the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) scheme will be extended by ten years to 5th April 2035 is a huge relief for UK start-ups. These schemes are vital for raising the capital they need to survive.”
He added: “Given that increases in CGT are on the radar, there was a fear that the Labour government would reduce the tax relief available through EIS and VCT, or even scrap the schemes. Thankfully the new government have instead decided to extend both, which may take some of the sting out of CGT rises for start-ups.”
Simon said: “The advantages of EIS and VCT are that they are a fast way to raise finance by attracting small scale investors via the many crowdfunding platforms in the UK. They unlock alternative ways to fund financing for start-ups through a large network of individual investors, who are more likely to fund ideas that may not appeal to Private Equity or Venture Capital.”
He added: “The schemes are also a good way to test the public’s reaction to a product or idea. If investors are keen to invest it is a good sign that this will work well in the market. If not, the schemes lack of up-front fees means stat-ups can go back to the drawing board without suffering losses.”
Simon said: “An example of a business who has benefited from these schemes is Chip Financial. This start-up had Europe’s largest crowdfunding campaign in 2020 & 2021 for £11m and most recently raised £4,735,847.59 across 4878 investors when the target was £1,000,000.”
He added: “The Seed Enterprise Investment Scheme (SEIS) was already extended by the previous government back in 2023, meaning new start-ups will potentially benefit from all three tax efficient schemes for at least the next decade.”
