Market leading insight for tax experts
View online issue

State aid approval for EIS and VCT changes

printer Mail

The European Commission has notified its decision to approve the latest enterprise investment scheme (EIS) and venture capital trust (VCT) scheme amendments, aimed at encouraging long term investment in higher risk and knowledge intensive companies. These changes were announced at Autumn Budget 2017 and are contained in FA 2018 s 14 and Schs 4 and 5. They apply variously from April 2018 or April 2019.

The changes include:

  • certain ‘grandfathering’ provisions enabling VCTs to invest in companies under rules in place at the time funds were raised will be removed with effect from 6 April 2018;
  • with effect from 6 April 2018, 30% of funds raised by a VCT in an accounting period will have to be invested in qualifying holdings no later than 12 months after the end of that period;
  • the proportion of VCT funds that must be held in qualifying holdings will increase from 70% to 80% with effect for accounting periods beginning on or after 6 April 2019; and
  • a new anti-abuse rule is introduced with effect from royal assent to FA 2018 (15 March 2018), to prevent loans being used to preserve and return equity capital to investors.

To encourage investment in knowledge intensive companies under the EIS and VCT schemes:

  • the limit on the amount an individual may invest under the EIS in a tax year is doubled to £2m, provided any amount over £1m is invested in one or more knowledge intensive companies;
  • the annual investment limit for knowledge intensive companies receiving investments under the EIS and from VCTs is doubled to £10m (but the lifetime limit will remain at £20m); and
  • greater flexibility will be provided when determining whether a knowledge intensive company meets the permitted maximum age requirement.

These changes apply to EIS shares issued on or after 6 April 2018 and to qualifying investments made by a VCT on or after that date.

The state aid approval is valid until 5 April 2025. See