Business Start-Up Schemes and Business Expansion Schemes were
introduced to enable an individual to claim Income Tax (IT) relief
at their top rate (e.g. 40%, so that for every £10,000
invested in such a scheme, £4,000 will be recovered, however
successful the investment might prove to be) if they invest in
qualifying risky unlisted companies and latterly, those set up to
provide private rented housing by taking advantage of the assured
tenancy provisions. Provided the shares are held for 5 years, no
Capital Gains Tax (CGT) is payable on any gains arising when they
are sold. The relief came to an end on 31 December 1993.
EIS
Enterprise Investment Schemes have replaced the BES and give
relief at the lower rate of IT in the year in which the investment
is made on investments up to £100,000 in qualifying unlisted
trading companies. Again, provided the shares are held for 5 years,
no CGT is payable on any gains arising when they are sold.
VCT
Venture Capital Trusts are listed companies which are
designed to enable individuals to take advantage of the EIS and
invest in a spread of unlisted companies through the medium of a
listed vehicle which should relieve them from the problems of
selling unlisted shares. VCTs are exempt from Capital Gains Tax on
chargeable gains and investors in them will not only be entitled to
relief at the lower rate of IT on their investment, but will also
be exempt from IT on dividends from them and from CGT on any gains
arising on their disposal.
Enterprise Zones
Enterprise Zones were established to regenerate depressed
inner cities by encouraging investment. One attraction was the
extension of the availability of Capital Allowances for industrial
buildings to commercial buildings (including hotels) in enterprise
zones. This enables the person who incurs the cost of a building to
claim 100% initial allowances, effectively IT at their top rate on
capital expenditure on such buildings. Property Enterprise Trusts
have been set up to facilitate investment in and development of
large sites by bringing together numerous individuals who hold the
property as tenants in common. CGT is payable on any gains which
arise on the ultimate disposal of the property.
