New tax relief rules could hold back Scotland’s tech sector, warns Baker Tilly

The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are government initiatives which offer attractive tax breaks to small businesses in the UK. EIS offers tax breaks to investors purchasing shares in small private companies, whereas SEIS is aimed at those investing in even smaller companies.

Both schemes, along with Venture Capital Trusts (VCTs), have raised billions of pounds worth of funding for small businesses, and helped drive investment in many companies – particularly in the technology sector.

However, as a result of EC direction, new stricter rules affecting the EIS and VCT schemes were introduced in the recent Summer Budget and Finance Bill, which could harm some businesses’ growth plans.

These new rules impose:

Ewan Grant, Baker Tilly’s Head of Corporate Finance in Scotland said: “These new rules add to the existing complexity of these schemes, and we are concerned that some high growth businesses in the Silicon Glen and beyond could be hit hard.

“The rules could deter acquisitions made to compliment or further develop existing technologies or create wider market applications, and yet ironically it is these very companies that George Osborne is keen to help grow. The Government may inadvertently have switched off the tap to a vital source of funding for many technology businesses across Scotland.”