Venture capital tax relief: where are we now? It’s all about providing early stage finance to new, higher-risk companies, and rewarding individual investors with generous tax relief for doing so. The venture capital schemes were envisaged as time-limited, and given sunset clauses in the legislation. But the position is now changing.
The schemes comprise the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Social Investment Tax Relief (SITR) and Venture Capital
on the age of the company’s qualifying trade increases from two years to three, and the gross asset limit also increases, from £200,000 to £350,000. • EIS and VCT schemes will now be available beyond 6 April 2025, though it is not yet clear whether a further sunset clause will apply.
assurance involves a company providing HMRC with detailed information so that it can give an opinion on its eligibility to use a venture capital scheme. If advance assurance is given, HMRC will send a statement saying the investment is likely to qualify: this can then be shown to potential investors. Working with you Navigating the venture capital scheme rules demands a high level of precision: shares, company and investor must all meet specific criteria for tax relief to be available. Whether you are a business interested in raising external finance, or an individual looking for tax-efficient investment, we should welcome the opportunity to look at the various options with you.
Trusts (VCTs). The EIS and VCT schemes were due to expire by 6 April 2025. Instead, they have been given a longer lease of life, and in some areas, made wider in scope.
• SITR is due to finish in April 2023.
• new admin: there is a new online Government Gateway service for companies to apply for advance assurance on a venture capital scheme. This is to be used for all schemes except SITR. SITR applications should still be made by email or post, with a covering letter and supporting documentation submitted. Advance
Details to note are as follows:
• SEIS benefits from increased limits from April 2023. These include increasing the amount companies can raise in SEIS investment to £250,000, and doubling the annual investor limit to £200,000. The limit
HMRC compliance: more data, more questions HMRC’s ability to gather and analyse data is extensive, and with every piece of information it acquires, its ability to target compliance activity increases.
campaigns involving what are called one-to-many nudge letters, often used where HMRC believes there are issues of potential non-compliance across a particular business sector or income source. There is usually a specific trigger for this, such as apparent mismatch between third-party data received by HMRC, and data it holds on tax returns submitted. From HMRC’s perspective, it’s cost effective and shifts workload to the taxpayer. Recent examples include nudge letters sent to taxi drivers working for online platforms like Uber and Lyft, and landlords who have put a deposit in a tenancy deposit scheme. In each of these cases, it is likely that the trigger has been HMRC receipt of third-party data. At the close of 2022, HMRC was writing to individuals registered as Persons of Significant Control (PSCs), where records from Companies House suggest that they stopped being a PSC in 2021/22. The letter is intended to serve as a reminder that if they are no longer a PSC because of a disposal of shares, this should be declared in the tax return. It also recaps responsibilities around capital gains tax reporting, and reminds of the potential need for amendment of returns if such disposals were not included. What to do HMRC nudge letters do not mean a formal compliance check, neither do they necessarily mean there is an error in someone’s affairs: any error could be HMRC’s. They should, however, always be taken seriously, with a timely response or review of the figures. As your agents, we may get a copy of such letters, but this is not always the case. Do please contact us if you receive a nudge from HMRC.
Input comes from many different sources, national and international - from regulated commercial bodies, like online sales platforms; to government organisations, like the Land Registry. Proposals recently tabled would extend data collection powers to cover provision of information on dividends paid to shareholders in owner-managed businesses; hours worked by employees; and the business sector in which self-employed people operate. Access to all this data gives HMRC a sharper, more comprehensive picture of taxpayer affairs than ever before. And it can use it to ask questions about taxpayer and business affairs. Increasingly, this is being done by
Disclaimer - for information of users: This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the authors or the firm. February 2023
Made with FlippingBook flipbook maker