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Enterprise Investment Scheme

Volume 450: debated on Wednesday 25 October 2006

To ask the Chancellor of the Exchequer what assessment he has made of the impact of the enterprise investment scheme in creating new company start ups. (96776)

In April 2003, HM Revenue and Customs published research into the enterprise investment scheme (EIS) carried out by PACEC and the Centre for Business Research at the University of Cambridge (available at: http://www.hmrc.gov.uk/research/report.pdf). This research concluded that the EIS scheme has met its objective of encouraging more investment by individuals in smaller, high risk trading companies, which in turn has increased their potential to grow and become successful.

To ask the Chancellor of the Exchequer how many investors sought tax relief under the enterprise investment scheme in each of the last five financial years; and what the value was of (a) income tax and (b) capital gains tax relief in each year. (96777)

The numbers of subscriptions made to invest through the enterprise investment scheme (EIS) are published by HMRC as National Statistics, see Table 8.1—‘Companies and amount of investment, number of subscriptions, business angels and amounts invested’ at:

http://www.hmrc.gov.uk/stats/ent_invest_scheme/table8-1.pdf.

The number of subscriptions is not equal to the number of investors as an individual can invest in more than one company.

Estimates of the aggregate cost of tax relief are published by HMRC as National Statistics, see Table 1.5—‘Main tax expenditures and structural reliefs’ at:

http://www.hmrc.gov.uk/stats/tax_expenditures/1_5_apr06.pdf

The estimated split between income tax and capital gains tax relief from 2001-02 to 2004-05 are:

£ million

Tax year

Cost of income tax relief

Cost of capital gains tax relief

2001-02

60

190

2002-03

50

150

2003-04

45

135

2004-051

40

130

1 Figure subject to revision, as more information becomes available. It is too early to give reliable estimates for 2005-06.