There has been ongoing uncertainty over the life span of Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) relief, as the date within the “sunset clause” has been approaching. Whilst it was widely expected that the sunset clause would be significantly extended, and this was officially announced during the Autumn Statement last year, we were still waiting for this to actually come into law.

As of 3 September 2024, this extension has now come into force, which should be seen as fantastic news for the EIS ecosystem. It removes any underlying uncertainty for businesses and investors alike and highlights the ongoing commitment of the UK Government to supporting start-ups in raising the capital needed to grow their businesses and the wider economy in the UK. The EIS has been a key part to providing £32billion of private investment to 56,000 startups over the past three decades. It can now help drive entrepreneurship and economic growth across the UK for another 10 years.

The sunset clause was created as part of European Union State Aid rules and means that VCT relief and EIS relief come to an end, unless they are re-evaluated and the sunset clause date is extended. The next sunset clause date was 6 April 2025.

It was announced during last year’s Autumn Statement that the Government would seek to extend this deadline by another 10 years to April 2035. The European Commission published a letter, at the end of July, confirming that they did not object to the UK’s 10-year extension following discussions with the UK Government.

EIS and VCT offer significant incentives to investors, who can claim up to 30% upfront income tax relief as a tax reducer and potential capital gains tax (CGT) exemption on the disposal of the shares. Additionally, EIS individuals can claim CGT deferral relief against their chargeable gains when a qualifying investment is made during the qualifying time, being 1 year before and 3 years after the chargeable gain.

Is your company seeking to receive EIS investment?

If you would like to find out how Johnston Carmichael can help, please don't hesitate to get in touch with myself, a member of our Entrepreneurial Taxes team or your usual Johnston Carmichael adviser.