Good news for the westcountry! (September 2011)

Good news for the westcountry! (September 2011)

The ‘go ahead’ has been granted for the expansion of the Government sponsored Enterprise Extension Scheme via an increase in the tax relief for investors providing funds for small firms (see article below written by Philip Aldrick, the Economics Editor at The Daily Telegraph which appeared in that newspaper on 26^th September). Given the very significant number of small firms in the South West, this should prove to be extremely good news for the westcountry.

Roger Mundy, Beardsley Theobalds

Angel investors in small businesses will receive a £100m tax break to back Britain’s growing companies, the Treasury will confirm today.

Brussels has cleared the Government to expand the Enterprise Investment Scheme (EIS) by increasing the rate of tax relief available from 20pc to 30pc and doubling the annual investor limit to £1m.

The Treasury hopes the tax breaks will encourage greater investment in some of the UK’s fast-growing, smaller companies. Since the EIS was established in the 1990s it has supported, along with venture capital trusts, more than £11bn of investment, Treasury figures show.

In 2008, the EIS helped raise £500m for 1,800 small businesses, including 500 hi-tech companies and hundreds of business services and manufacturing firms.

The Treasury is keen to encourage angel investors because they typically support high growth companies creating innovative new products and jobs. It hopes the measures will increase the amount of investment directed at the high-growth small business sector.

The Chancellor George Osborne said: "We want to make the UK the 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 in Britain by investing in the small businesses that have the potential to be fast growing."

Under the EIS, angel investors can benefit from a range of income and capital gains tax reliefs when they subscribe for shares in a venture capital trust or other qualifying company.

The measure was unveiled in the Budget, and a £100m annual cost declared, but the European Commission has only just give the scheme state aid approval.

The increase in the rate in being back dated for investments made since April this year, and the doubling of the investor limit comes into effect next April.

The Coalition is under pressure to improve the access to financing for small businesses amid continuing complaints the Britain’s banks are still failing to lend. Under the Project Merlin agreement, Britain’s banks agreed to lend a total of £190bn to small firms this year.