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September 2011

Enterprise investment scheme changes

Tax breaks for investors are to be extended, the government has confirmed, in a bid to boost fast-growing small companies. 

Reform of the existing Enterprise Investment Scheme (EIS) was announced by chancellor George

Osborne during the March 2011 Budget but it has only just been authorised by the European Commission.

Under the changes, the rate of income tax relief to investors has raisen from 20% to 30%, effective for investments made from April 2011. The annual EIS investment limit for individuals will also be raised, from £500,000 to £1m, and will be effective for investments made from April 2012. 

George Osborne, chancellor of the exchequer, said: "We want to make theUKthe best place to start, finance and grow a business. These changes will give a bigger tax break to those who take risks for growth and jobs inBritainby investing in the small companies that have the potential to be fast growing."

During his 2011 Budget statement, Osborne noted that a lack of start-up capital has been a long-standing problem in the British economy and the aim of the EIS, originally set up during the 1990s, is to encourage growth into fast-growing start-ups from investment angels.

Recent figures from the Treasury show high-growth companies account for just 6% of businesses employing over 10 people, yet 54% of all new jobs created by established businesses employing over 10 people in the past three years were created by high-growth companies.

Parliamentary legislation will be changed to accommodate the approval following the summer recess.