GEORGE Osborne hopes to stimulate Britain’s flagging economic recovery with yet more measures to encourage wealthy individuals to back start-ups.
He will extend the Enterprise Investment Scheme (EIS) to offer income tax relief of 50 per cent to individuals who invest up to £100,000 and to companies which provide backing of up to £150,000.
The Seed EIS (SEIS), to be launched in April, will also encourage re-investment by granting a capital gains tax holiday to those who pour their SEIS gains back into start-ups in 2012-13.
The moves won the support of business angels although experts have raised fears the means of paying for it – a freeze on capital gains tax relief – could be punitive if it is continued over the long-term.
Richard Anton, chairman of the BVCA, said the measures would encourage innovation, adding: “This is a rare case of a George coming to the assistance of Dragons.”
The decision to freeze the 2012-13 exemption for capital gains tax at £10,600 was criticised by tax experts, however. Alison Smith from PwC said it was “unlikely” to achieve much and would not stimulate sales.
“The chancellor is expecting this freeze to continue so any one looking to make a capital gain in the future could be a loser... With higher inflation, the cumulative effect could be significant.”
The Treasury cheered business angels, however, by making it easier for venture capital trusts to provide backing through the abolition of the £1m investment limit per company.