Relief for investors in small companies


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Tax breaks for investors in small companies are to be extended, the Government will confirm today.

At the Budget in March, Chancellor George Osborne pledged to increase the rate of income tax relief available under the Enterprise Investment Scheme (EIS) from 20 per cent to 30 per cent.

He also announced a doubling of annual investor limits under the scheme to £1m. Those tax breaks have now been ruled by the European Commission to be in accordance with the EU's state aid rules.

The increase in the tax relief will come into effect from April 2011. The new investor limits will apply from April 2012. The EIS was established in the 1990s and was designed to support small, high-risk, start-up firms.

The Government estimates the cost to the Treasury of the higher tax break will be £100m a year. This sum has already been accounted for in the Chancellor's deficit reduction plans.

According to the Treasury, the EIS supported more than 1,800 businesses in 2008-09, which, it claims, helped to raise £500m in investment for small companies.