Market leading insight for tax experts
View online issue

Consultation on EIS knowledge-intensive funds

printer Mail

HM Treasury is consulting until 11 May 2018 on possible options for a new EIS fund structure aimed specifically at attracting investment in knowledge-intensive companies.

At Autumn Budget 2017, the government announced its intention to consult on a new EIS fund structure aimed at improving the supply of capital to knowledge-intensive companies. This followed the ‘Financing growth in innovative firms’ consultation in August 2017.

The government would expect any new fund model to build on the existing EIS rules, although it is possible that a small proportion of investments, possibly 10-20%, could be in non-knowledge-intensive EIS companies. The government anticipates any new knowledge-intensive fund being subject to HMRC approval, although the current HMRC-approved fund structure for general investments, which has a low take-up, would be removed.

Alternatives being considered are:

  • dividend tax exemption applied in respect of investments made through a knowledge-intensive fund after a fixed holding period (say five or seven years);
  • CGT relief on reinvestment into a knowledge-intensive fund;
  • extended carry-back of relief for investors in a knowledge-intensive fund; or
  • up-front tax relief at the time the investor contributes capital to the fund, provided the capital is invested within a specified time, for example two years.