The Seed Enterprise Investment Scheme – Our View

December 1, 2011 Categories: Money, Tax

On Tuesday the Chancellor announced an extension to the Enterprise Investment Scheme to cover smaller investments up to £100,000 with a tax break of 50%.  This so called Seed Enterprise Investment Scheme is meant to encourage people to invest at the very early stages of setting up a new business.

At the same time the Chancellor is extending 100% capital allowance write off for plant and machinery investment incurred between April 2012 and March 2017 in six enterprise zones, principally areas in the north of England.

Although both of these measures are positive and can only encourage direct investment in businesses and/or equipment it seems to us that the tax break would have been better if the 100% capital allowances had been extended to the whole of the UK.  It is all very well encouraging people to make direct investments into small businesses which are of course risky but surely it is better to encourage existing businesses to invest in equipment and get an immediate cash flow advantage.  After all not that many people have £100,000 sitting around that they wish to invest in a new business and it is only they who get the tax benefit.  There are plenty of businesses who need to invest in plant and machinery but could do with a bit of cash flow help them achieve it.

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