BUDGET REPORT

9 MARCH 1999

BUSINESS TAX AND INVESTMENT INCENTIVES

ENTERPRISE INVESTMENT SCHEME (EIS) COMPANIES

"Serial" entrepreneurs and other investors in EIS companies are to receive a new capital gains tax relief. This is designed to give "business angels" the chance to defer a chargeable gain on the disposal of an EIS investment by re-investing in another EIS company. The serial investments will thus qualify for taper relief from the date of the first investment to the date of the final disposal. Two anti-avoidance provisions have been introduced at the same time: one stops the use of funds by a subsidiary of an EIS company unless it is at least 90 per cent owned, and the second amends the Venture Capital Trust rules so that relief from income tax on distributions is withdrawn where the main purpose of the investment was the avoidance of tax. The first of these anti-avoidance provisions takes effect on or after 6 April 1999 and the second on or after Budget day.

CONSULTATIVE DOCUMENT ON THE REVIEW OF CHARITY TAXATION

The long awaited results of the review of charity taxation that was launched in July 1997 were published on Budget day. The review was a joint exercise between the Inland Revenue, UM Customs and Excise and the business rating authorities. The document addresses the simplification of the tax system for charities by exempting the profits of small charity business from direct tax and aligning direct and indirect tax relief where possible. Charities are invited to respond to the consultative document: responses are required by 31 August 1999. This will be the final opportunity for charities to make their views known on this far-reaching review.

MISCELLANEOUS BUSINESS MATTERS

The Chancellor announced today a tax boost to widen the use of IT within the business community. From 6 April 1999 employees will be able to use an employer's computer at home without fear of a tax charge as long as the value of the computer equipment is £2,000 or less.