The tax-efficient investment sector could receive a Brexit boost, predict wealth advisers, as some of the more recent regulations imposed at the behest of the European Union (EU) are reversed or pared back once the UK is out of the bloc.
Over the past three years, the sector has seen state-aid rules imposed on it via UK government legislation, including restrictions on replacement capital and MBO-backed investments along with limits on the age of a company that can be invested in and the amount of money it can receive under tax-efficient schemes.
Some advisers are now hopeful that in a post-Brexit scenario, however, there could even be a wholesale rollback of recent restrictions.
"The government might be persuaded to change tack on MBO rules if there was enough pressure from the industry," says Ben Yearsley (pictured), co-founder and investment director at Wealth Club. "The Enterprise Investment Scheme [EIS] sector was caught by the new rules on replacement capital. These rules could be loosened in future."
Yearsley suggests the industry should attempt to "prove the argument" the tax breaks provide valuable assistance and pay the country back via corporation tax and PAYE contributions. "MBOs weren't bad," he adds. "These are managements that want to grow the businesses. That is good for the company, good for the investor and good for the economy."
The comments of Yearsley and others on the subject appear in a report issued by tax-efficient investment platform GrowthInvest.com entitled EIS and SEIS: the tax-efficient motors of the economy. It suggests the sector can be hopeful it will see some measures introduced after the UK has left the EU.
GrowthInvest managing director Daniel Rodwell points out the rigidity of the rules can cause problems for the companies trying to raise cash. He believes stipulations regarding the age of the company that can be invested in - seven years for most companies but 10 years for defined knowledge-intensive firms - might be revisited once the UK is out of Europe.
The sector might have to wait until the whole process is complete before it sees any moves, Rodwell warns, however, adding: "Without Europe choosing the direction of travel, it does open up the possibilities of future changes, but we are not expecting that to be in the next couple of years."
Other advisers caution against unrealistic expectations of how the government might act - or indeed when. Tom Hopkins, a partner at Kin Capital, says he understands there are hopes in some quarters the government will revert to how the rules stood just a few years ago but he believes this is overly optimistic.
"I don't see that happening," he adds. "The government likes where it is directing this capital and that is into growing businesses that are going to create jobs and expand the UK economy."
Brian Moretta, head of tax-enhanced services at Hardman & Co, agrees. "Take a step back," he says. "Do I as a taxpayer want to be subsidising MBOs? No I don't. And to some extent I think the industry is doing itself a disservice if it points itself in that direction."
Nevertheless, says Jack Rose, head of tax products at LGBR Capital, the general backdrop for all tax-efficient investment products is one of governmental encouragement - with support for smaller enterprises crucial. "That comes down to the funding and I think the government knows that. It will underline the importance of the tax-efficient sector, from VCT to EIS, SEIS and Social investment tax relief."
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