With exquisite timing given my Monday's post, the Chancellor's Autumn Statement included further changes to the Enterprise Investment Scheme, the most interesting of which is the creation of the Seed Enterprise Investment Scheme.  

From the start of the new tax year, qualifying investments into start-up businesses will attract a fairly extraordinary 50% income tax relief - but even more extraordinary, if the funds used to make such investments in 2012-13 come from Capital Gains made in the same year, the CGT liability on those reinvested funds will be waived.  In effect, it's conceivable that total investments of £100K by an individual into start-ups in 2012-13 will actually cost the investor just £22K.

The devil of the detail has yet to be announced, and you can be pretty sure there will be some fairly intense detail here - because if there isn't, given the availability of income tax relief down the line should the investment fail, it wouldn't take long to create a structure that gave a guaranteed payback - Create a Newco with a nonsensical business plan - attract Angel Investment of £150K.  The Angel Investors save themselves 28% tax on gains they've made - that's £42K - and get an income tax deduction of £75K.  Three years down the line, the business duly fails - and the Angel Investors get further income tax relief in the year of loss of up to another £37.5K.  That's a total tax saving of £154.5K on a failed investment of £150K - can't see it happening.

But this new scheme fits perfectly with the comments in my earlier post.  We need to find ways to get businesses funded, the Treasury has found ways to significantly limit the downside risk of doing so.