Schedule 14 - Enterprise management incentives: amendments
Finance Bill
11:45 am
Mr Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)
The aim of the targeting rule is to restrict the enterprise management incentives, the enterprise investment scheme and the corporate venturing scheme to small companies. The amendments to EIS and CVS are for an increase in the gross assets requirement from the present £15 million before the investment and £16 million after it, to £20 and £25 million respectively. Those schemes aim to encourage equity investment in small companies. They are targeted in that way because smaller companies experience the greatest difficulty in raising start-up finance and funds for growth and development.
Extending the size of companies that can qualify would divert funds away from the small higher risk companies that the schemes are intended to support, thereby undermining the effectiveness of the schemes and potentially significantly increasing the cost to the Exchequer. Similarly the proposal for a 33 per cent. increase in the limit for enterprise management incentives would undermine the policy of EMI, which is to focus on helping smaller companies recruit and retain the key employees whom they need to make them grow.
We keep those requirements under review. The growth asset requirement at its current level was introduced as recently as 1998 for EIS, and just last year for corporate venturing and management incentives. It would be too soon to consider such a big increase in the requirements for these schemes given that they are aimed at small companies. I do not agree with the hon. Gentleman's comment about low levels of take-up. The level of take-up has been very encouraging in all cases. Taken together, the amendments would significantly increase costs. They would undermine the carefully designed aim of the schemes and create an unwelcome disparity with the legislation for venture capital trusts, which uses the same test. I hope that the hon. Gentleman will not press the amendments.