Experts say the Chancellor has not done enough to stimulate much-needed investment in businesses.
In his Budget speech Alistair Darling introduced a simplification of the Enterprise Investment Scheme (EIS), which provides tax relief for investors, but venture capital firms say he has not gone far enough.
New rules announced yesterday relaxed legislation governing when a company has to spend money raised through the EIS and gave greater flexibility for investors wishing to carry back tax relief.
Tracey Macintosh, tax partner at accountant BDO Stoy Hayward, said: “Whilst these changes are welcome, they don’t go nearly far enough.
“The Chancellor has ignored justifiable calls to raise income tax relief on EIS investment to 40 per cent, and relax the rules for investee companies and, in doing so, has missed a vital opportunity to help small businesses raise increasingly scarce equity finance to get them through the recession and create jobs.”
Ms Macintosh said the Chancellor had not answered calls from industry to relax the rules for the type of company that can benefit from EIS investment.
She explained: “This is a missed opportunity. Companies can only raise £2 million a year from venture capital schemes, and have to have less than 50 employees.
“These restrictions are certainly hindering investment in medium-sized companies and the Chancellor should have taken a more robust position on the EU State Aid rules behind them and removed the£2 million limit and increased the employee limit from 50 to 250.”
Simon Walker, chief executive of the British Private Equity and Venture Capital Association, said: “The Chancellor claimed that his Budget would focus on investing in the future and playing to this country’s strengths while ensuring that Britain remained a world-class centre for finance.
“The reality is that he has invested in the past, is undermining the country’s strengths and his measures represent a real threat to Britain’s status as a world financial centre.”