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We are making good progress, and I hope that we may continue that in a short discussion of clause 51, which removes the time limit on tax relief for investments through the seed enterprise investment scheme. Previously tax reliefs were limited to investments that took place after 6 April 2012 and before 6 April 2017. Under the new arrangements the scheme is extended permanently. Therefore the provision of the Income Tax Act 2007 that allows the Treasury to extend the scheme by order is removed, as it is no longer necessary.
The SEIS came into effect from 6 April 2012 and was designed to help small early-stage companies to raise equity finance, by offering a range of tax reliefs to individual investors who subscribed for shares with a stake of no more than 30% in the companies. It complements the existing enterprise investment scheme, but offers a higher rate of relief because of specific difficulties that small start-ups have in attracting investment. The investment limit is set at £150,000 for companies that have not benefited from investment under either EIS or VCT, that employ 25 or fewer employees, and that have gross assets of under £200,000. I understand that the Government are also committed to exploring options for tax reliefs to apply when individuals make investments in the form of convertible loans.
We recognise what the Government are trying to do, but I have a couple of questions for the Minister, particularly about the current level of tax relief on investments and the cap of £150,000. Some investors have suggested that it should be higher. Do the Government have any plans to raise the cap on investments eligible for tax relief?
The Minister gave us the benefit of his knowledge of figures about VCTs. Is he able to provide any up-to-date figures for the amounts invested in small start-up companies, through the SEIS in recent years? What is the anticipated level of take-up for the scheme in the years ahead?
In last year’s Finance Bill Committee debates we highlighted that, as in a written response, the Government estimated that 300 completely new companies would benefit from SEIS over the course of a year and that, overall, 1,000 companies would benefit. Will the Minister provide an update on progress towards meeting those estimates and can he provide us with any other information about what will happen in future?
Clause 51 would make changes to ensure that the SEIS is made permanent. The scheme, which was introduced in 2012, is designed to help small early-stage companies, which often find it difficult to obtain financing in the critical first few years, to attract investment, making it easier for them to grow and become established. The scheme encourages equity investment into qualifying companies, by providing income and capital gains tax reliefs for individuals who invest in shares for such companies.
The scheme currently contains a sunset clause that limits the relief to shares issued on or after 6 April 2012 but before 6 April 2017. The changes made by the clause will remove the 6 April 2017 restriction and permanently extend the scheme, ensuring that vital early-stage funding will continue to be encouraged in new companies, supporting their growth and enabling them to make a valuable contribution to the wider economy.
My hon. Friend makes an important point. This is about ensuring that we have a more dynamic economy and that it is easier for early-stage seed businesses to find finance. That helpful measure is a key part of our long-term economic plan.
On the size of the scheme, which the hon. Lady mentioned, there is no fixed definition of “seed investment” as such, but having considered evidence regarding the generosity of the tax relief and what is affordable, the investment limits have been set to provide the first tranche of investment required to get a business up and running. The scheme is not intended to provide long-term investment support. The EIS and VCT, which we have just debated, remain available for that purpose. Increasing the limits of the scheme would require us to notify the European Commission about that, which could deem it to be an illegal state aid. However, currently it falls below the de minimis level.
The latest figures for the scheme’s use show that more than 17,000 early-stage companies have now benefited from investment, which is more than anticipated in the numbers that I gave last year; there have been more than 4,000 expressions of interest for future involvement; and more than £150 million of investment has been supported by seed enterprise investment schemes. On the basis of those numbers, certainly compared with what was predicted previously, we believe that the scheme is working well. I am grateful to have had the opportunity to put that on the record and hope that the clause stands part of the Bill.