UK Business Angels Association rejects cap on income tax relief for investors
UK Business Angels Association has responded to the Government’s proposals to cap loss relief, stating that this will have a significant negative impact on both existing angel investing and the attraction of new angels. The Chancellor set out in his April budget the government’s intention to cap the amount of loss relief that angel investors can claim in any one year to £50k.
The Trade Association has widely consulted with its membership and the wider investment community who are unanimous in rejecting this proposal.
Jenny Tooth CEO of UK Business Angels Association says “At a time when the Government is backing the new SEIS 50% tax break to bring new investors to support start up and early stage businesses, the capping of loss relief is sending out a negative message when we need to create a very positive environment to encourage more individuals to recognise the opportunities to bring their finance to grow small businesses”.
“The proposed measure also fails to take account of the very substantial sums that many angel investors invest each year in start-up and early stage businesses. These investors are prepared to take considerable risks with their funding of start-up and early stage businesses and will have an extensive portfolio of start-up and early stage businesses and inevitably have a number of businesses at risk of failure within their portfolio at any one time and compounded by the current lack of exit possibilities. The cap of loss relief at £50k pa is seen as a significant deterrent to taking such risks and likely to reduce the number of investments and the risk profile that these angels are prepared to accept going forward”.
“Capping the downside protection would also have an impact on the number of successful syndicated deals that get done which are led by active angels thereby preventing the leverage of considerable sums of angel finance into small businesses through these syndicates”.
UK Business Angels Association recommends that since the EIS and SEIS scheme has already created a framework for qualifying companies, only investments made in small businesses that meet the criteria for qualifying for EIS tax relief should be considered for loss relief and without any cap, reflecting the current EIS/SEIS model.