The Government have identified that the legislation does not work as intended for companies within the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) in relation to provisions requiring calculation over the preceding five year period for the average turnover amount and the prior three year period for operating costs conditions.
Finance Bill 2016 will introduce provisions to determine the five year and three year periods. These changes will take effect for shares issued under the EIS, and investments made by VCTs, on or after 18 November 2015. This will ensure that the most recently filed accounts of a company are generally used to determine the end date of the relevant period. However, an investee company may elect for the current law to apply for investments received up to and including 5 April 2016, in which case the measure will take effect for investments made on or after 6 April 2016.
A new condition will be introduced to clarify the non-qualifying investments a VCT may make for liquidity management purposes and will take effect for investments made by VCTs on or after 6 April 2016.
These changes clarify the position with regard to provisions that were introduced on 18 November 2015.