In his Autumn Statement on 29 November 2011, the Chancellor of the Exchequer announced a variety of initiatives in response to the prevailing financial and economic environment. Although those initiatives do not relate to employee share schemes specifically, they may be relevant to many companies operating such schemes (especially small and medium-sized businesses).
 
Enhanced EIS for Smaller Companies                     
In order to encourage investment in new start-up companies the Chancellor announced the launch of a new Seed Enterprise Investment Scheme (SEIS) with effect from April 2012. Under the SEIS, which in effect creates a special, enhanced form of EIS for smaller companies, individuals can claim income tax relief on 50 per cent of the money  invested in shares (up to £100,000), and a capital gains tax exemption on gains realised in 2012-13 which are then invested through SEIS in the same year.
 
In this connection, it should be noted that the annual exempt allowance for capital gains tax will be frozen at £10,600 for 2012-13.
 
EIS Also Simplified
The Chancellor also announced that the Government will simplify EIS by relaxing the connected person rules and the definition of shares that qualify for relief. The Government will also tighten the focus of EIS and Venture Capital Trust (VCT) schemes by introducing a new test to exclude companies set up for the purpose of accessing relief.  In addition to these changes that were consulted on, the Government will remove the £1 million investment limit per company for VCTs to reduce the administrative burdens of the scheme.
 
The current small business rate relief holiday is to be extended for a further six months from 1 October 2012. The Government will also give businesses the opportunity to defer 60 per cent of the increase in their 2012-13 business rate bills as a result of the RPI adjustment, to be repaid equally during the following two years.
 
As previously announced, draft legislation for Finance Bill 2012 will be published on 6 December, and we shall include in our next newsletter any issues arising which might affect employee share schemes and the companies which operate them.