Consultation outcome

Tax-advantaged venture capital schemes

This consultation was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This consultation has concluded

Download the full outcome

Detail of outcome

Tax-advantaged venture capital schemes: response to consultation

Original consultation

This consultation ran from to


At Budget 2011 the Government announced a package of reforms to the tax advantaged venture capital schemes.


Consultation description


At Budget 2011 the Government announced a package of reforms to the tax advantaged venture capital schemes (the Enterprise Investment Scheme and Venture Capital Trusts) to ensure the schemes continue to support equity investment in new and innovative high growth-potential enterprises.

The Government also announced it would consult on options to provide further support for seed investment, simplify the EIS rules by removing some restrictions on qualifying shares and types of investor and refocus both EIS and VCTs to ensure they are targeted at genuine risk capital investments.

Consultation response

This consultation closed on 28 September and the Government response was published on 6 December 2011.

We would like to thank all those who contributed to the consultation, either by submitting written responses or in forum discussions with HM Treasury and HMRC.

Seed Enterprise Investment Scheme

Following the consultation the Chancellor has announced in his Autumn Statement, that the Government intends to introduce the Seed Enterprise Investment Scheme to encourage investment into new early stage companies.

Simplification and refocusing EIS and VCTs

As set out in the consultation document the Government will:

  • replicate the definition of ‘eligible shares’ that qualify under the VCT scheme for EIS; and,
  • reform the connection rule, where investors are disqualified if their aggregate shareholding and any loans they have advanced to the company exceed 30% of the total company aggregate of those elements, by removing the loans element.

In addition the Government will remove the £1 million investment per company per annumlimit for VCTs, other than where the company is a member of a partnership or party to a joint venture.

On refocusing:

  • new legislation will be introduced that will operate by defining “disqualifying arrangements.” Any shares which have been issued in connection with “disqualifying arrangements” will not attract relief; and, 
  • tax relief will no longer be available where the monies raised by a share issue are to be used for the purposes of acquiring shares in another company, unless those shares are being subscribed for in a new subsidiary established by a parent company.


Draft legislation setting out the reforms to be implemented in April 2012 is published as part of Finance Bill 2012.