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Government looks to boost small business investment

The Treasury is holding a consultation on ways and means of increasing the level of funds that are invested in smaller enterprises.

The hope is to encourage investors to put more money into start-ups and small firms with high growth potential.

The consultation will look at ways that Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) can be simplified and changed.

Also under consideration is a plan to support seed investment through offering tax reliefs to business angels.

Many smaller firms experience difficulties in attracting equity finance because the modest size of the investment can put off investors who would rather invest larger sums in larger companies.

The reforms follow on from changes to the EIS and VCTs announced in the 2011 Budget which include: raising the rate of EIS income tax relief to 30 per cent from April 2011; increasing the annual EIS investment limit for individuals to £1 million from April 2012; increasing the qualifying company limits to 250 employees and gross assets of £15 million for both EIS and VCTs from April 2012; and raising the annual investment limit for qualifying companies to £10 million for EIS and VCTs from April 2012.

David Gauke, Exchequer Secretary to the Treasury, said: "The Government wants to make the UK the best place in Europe to start, finance and grow a business and we know that a vital part of this is ensuring access to a wide range of sources of finance. 

"We are proposing a new, targeted scheme to encourage greater investment by business angels in start-ups and entrepreneurs' businesses.  This, alongside our reform of the EIS and VCTs, is part of our plan to increase the competitiveness of the UK tax system, demonstrating that Britain is open for business."

The consultation period runs to 28 September 2011. The consultation document can be found at: http://www.hm-treasury.gov.uk/consult_tax_advantaged_venture_capital_schemes.htm