UK to review tax breaks

The patient capital review UK Chancellor Philip Hammond announced during his budget speech in March is expected to begin in May 2017.

The UK government is set to announce tax break reforms to ensure that entrepreneurs benefit from the tax incentives, rather than property investors, This is Money has reported.

The patient capital review which UK Chancellor Philip Hammond called for during his Budget speech in March is due to start in May 2017, and will cover the Enterprise Investment Scheme (EIS).

The scheme offers several types of tax relief to investors who purchase new shares in small, higher-risk companies in order to help them raise capital.

For example, individuals who acquire shares in an EIS can claim relief at 30% of the cost of the shares against their income tax liability for the year in which they made the investment.

Individuals can claim up to £1m ($1.25m) invested in EIS shares, or a tax reduction of up to £300,000 in a given year.

Kealan Doyle, chief executive of Symvan Capital, an investment fund advisor focused on the technology sector, said Treasury officials had indicated that reforms would be unveiled in the autumn budget following the May 2017 review.

Doyle said Treasury officials he met with had told him the EIS has been “effective…in generating investment into growth sectors such as technology”.

Doyle said: “The market for a long time has been focusing on the wealth management community, which is primarily buying these products as an asset-backed play, but the Treasury wants it more for enterprise.”

Income tax relief is a key driver in investments, according to a report commissioned by the UK department HM Revenue and Customs into the use and impact of the EIS.

The patient capital review “aims to ensure that high growth businesses can access the long-term capital that they need to fund productivity enhancing investment”, according to the spring 2017 budget.

“Alongside identifying barriers to institutional investment in long-term finance, the review will also consider existing tax reliefs aimed at encouraging investment and entrepreneurship to make sure that they are effective, well targeted, and provide value for money.”

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