Commission Approves Three UK Fiscal Venture Capital Schemes

by Robert Lee, Tax-News.com, London

05 May 2009

The European Commission has approved, under EC Treaty state aid rules, three UK fiscal venture capital schemes: the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCTs) and the Corporate Venturing Scheme (CVS). The schemes form part of the UK's measures to support access to finance to SMEs and provide tax incentives to individual and corporate investors to encourage their investments in unquoted SMEs. As all the requirements of the Community risk capital Guidelines have been met, after the UK modified the schemes, the Commission considers that the aid is therefore compatible with Article 87(3)(c) of the EC Treaty, which allows aid to facilitate the development of certain economic activities.

The objective of the UK's venture capital schemes is to encourage private risk capital investment in unquoted small and medium-size enterprises (SMEs) in the UK by providing a range of tax relief to individual and corporate investors who invest in minority stakes in qualifying SMEs. The expected annual amount of tax relief across the schemes is approximately GBP250m.

Under the Enterprise Investment Scheme (EIS), private individuals receive tax incentives for making direct investments in qualifying SMEs. The Venture Capital Trust (VCT) scheme offers tax incentives to private individuals for collective investments through VCTs, managed by professional fund management companies. The Corporate Venturing Scheme (CVS) provides tax relief to companies making direct investments in qualifying SMEs. The maximum annual investment limit per qualifying company raising money under the three schemes is GBP2m.

While the venture capital schemes have been put into effect without prior notification to the Commission, the UK has now modified the schemes to ensure that they comply fully with the Risk Capital Guidelines (see IP/06/1015).

The non-confidential version of the decision will be made available under the case number NN 42a/2007 and NN42b/2007 in the State Aid Register on DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

Recommended