There was also encouragement to help small companies raise finance, with the Chancellor proposing a significant increase to the venture capital tax reliefs, by increasing the tax relief available, and raising some of the size limits for qualifying companies. The increase in the maximum amount an individual can invest in a qualifying Enterprise Investment Scheme (EIS) company, has been doubled from £500,000 to £1m, and should be particularly helpful to companies raising funds from business angel investors.

The changes announced will be welcome to many small companies which have struggled to raise funds in recent times, and have particularly found the changes brought in since 2006 unduly restrictive, although it will be 12 months before the current restrictions are raised.

The rate of Income Tax relief given for EIS investments made through an approved EIS fund will depend upon the date on which the fund closes. Funds which closed by 5th April 2011 received Income Tax relief of 20%, but if they close after 5th April 2011 the rate of relief will be 30%. But if an EIS investment made in the 2011/12 tax year is carried back to 2010/11, the rate of relief will be 20%, not 30%; so investors will need to carefully consider whether a carry back claim should be made.

Further changes to the EIS are proposed from April 2012. The amount that a company can raise in any rolling twelve month period will increase from £2 million to £10 million. The size of a qualifying company is also to be increased from £7 million gross assets to £15 million (before the EIS investments are made).

Companies whose businesses consist to a substantial extent (i.e. 20% or more) of the receipt of feed-in tariffs (or equivalent) will no longer be eligible to receive Venture Capital Trust (VCT) and EIS funding. This change will affect most green energy generating companies, and not just solar power. The timescale for the change will depend upon when the investment is made in such companies. The policy objective is that companies benefiting from such subsidies should not also benefit from EIS and VCT funding.