Tax perk crackdown for wealthy investors predicted
Popular investment schemes, including Enterprise Investment Schemes (EIS), which benefit wealthy investors by offering generous tax breaks, could be subject to new restrictions.
Industry sources claim HM Treasury is becoming more aware that some claims are being exploited in attempts to avoid tax.
EIS currently permits and encourages people to invest in start-up businesses, by adding various incentives including tax breaks and capital gains savings.
At the moment, if someone invests into a start-up they will receive a 30 per cent income tax relief. For example, this means that if someone puts £100,000 into a business, they will receive £30,000 back in tax relief.
Restrictions have already been placed on EIS, which limit the amount a company can have in assets to £15 million and what they can receive in investment to £5 million, but sources speculate that tougher restrictions are forthcoming.
They believe that HM Treasury is likely to cut the tax relief currently offered even further, place more restrictions on companies that qualify for funding or make it a requirement that people using the scheme must invest in a company for a lengthier amount of time.
A spokesman for HM Treasury has said that they will not comment on plans until the Autumn Budget has been officially announced on 22 November.
He has, however, confirmed that HM Treasury is undertaking a review of capital markets (The Patient Capital Review), which is looking into whether tax reliefs are well targeted and delivering value money for taxpayers.
According to HMRC figures, more than £1.8 billion was invested in 5,500 companies last year through EIS and the Seed Enterprise Investment Scheme (SEIS).