Pictured above: Andy McQuillan

Midlands based chartered accountants and business advisers Dains report that the government has published a consultation on their proposals for encouraging investment in small and start-up businesses with high growth potential.

This is primarily to be achieved by the reform and simplification of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).  

EIS and VCTs are designed to help smaller higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies  

The EIS has been around for many years, allowing investors to claim a credit against their Income Tax liability of up to 20% of the amount invested in the scheme. The government is proposing to increase this credit to 30%, bringing further relief against Income Tax for individual taxpayers. The EIS investment limit for individuals is also being increased from £500,000 to £1m from April 2012.

Together with the generous Capital Gains Tax deferral reliefs available to an EIS investor, this scheme is likely to become more popular in forthcoming years.  

The government has also announced that they are proposing a new, targeted scheme to encourage greater investment by business angels in start-ups and entrepreneurial businesses. This, alongside the reform of the EIS and VCTs, is part of the government's plan to increase the competitiveness of the UK tax system in order to increase global competitiveness.

Andy McQuillan, comments: "This is very welcome news from the government. The simplification of the investment opportunities available to potential investors and clarity on the tax perks of doing so is positive news for small business across the Midlands. However, the complex nature of this means that investors should seek professional advice before embarking on any investments."