Accountants Baker Tilly are warning that new rules introduced in this year’s Finance Bill could jeopardise the growth plans for tech businesses in the North West.
Stricter rules over two schemes which offer tax breaks to UK small businesses: The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), could harm investment in local firms, say the advisory company.
Both, along with Venture Capital Trusts (VCT) have raised billions of pounds worth of funding for small businesses, and helped drive investment in many companies – particularly in the technology sector.
They’re especially relevant for small start-up firms, the likes of which have taken up office space in and around Salford Quays and MediaCityUK.
EIS offers tax breaks to investors purchasing shares in small private companies, whereas SEIS is aimed at those investing in even smaller companies.
Read: Gather launch AR app for Dreamsope TV
Read: MediaCityUK-based GovToday closes with loss of 22 jobs
Read: Billionaire firms buy Salford Quays Anchorage offices for £35m
But new rules introduced in the Summer Budget and Finance Bill, could effectively “switch off the tap to a vital source of funding”, says James Wild, Corporate Finance Partner for Baker Tilly in Manchester.
These new rules impose limits on the age of a company that can apply for these types of finance, dropping from 12 years to 7 years.
The total lifetime risk finance funds which can be raised by knowledge intensive companies has fallen to between £12 million and £20 million
No VCT or EIS funds can be used to acquire other trades or companies, which could hit potential mergers.
Wild told SalfordOnline.com: “These new rules will only add to the existing complexity of these important and successful schemes, and I’m concerned that high growth technology businesses such as software companies in the North-West will inadvertently be the victims of new legislation.
“They 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 in the UK.
“It’s very possible that the Government inadvertently may have switched off the tap to a vital source of funding for many businesses in the North-West.”
