ISAs, Junior ISAs and Child Trust Funds

From 1 July 2014, Individual Savings Accounts (ISAs) will become ‘New ISAs’ (NISAs). The annual subscription limit will be increased to £15,000. The current rule whereby only half the overall annual limit can go into a cash ISA will be abolished. Investors will be permitted to transfer their investments from a stocks and shares account to a cash account. The range of securities that can be invested in will be widened (and will include certain retail bonds with less than 5 years before maturity and Building Society Core Capital Deferred Shares). The flat rate charge, representing tax at the basic rate, on any interest arising on temporarily uninvested cash in a stocks and shares account will be removed.

The annual amount that can be invested in a Junior ISA or Child Trust Fund account is to be increased to £4,000 from 1 July 2014.

Venture Capital Trusts

With effect in relation to shares issued on or after 6 April 2014, income tax relief will not be available on a subscription for shares in a venture capital trust (VCT) where the investor sells shares in that same VCT and the sale is conditional upon the subscription, or the subscription is conditional upon the sale, or the subscription is made within 6 months of the sale. This will apply equally where one VCT is deemed to be a successor or predecessor of another following a merger or restructuring. Subscriptions where the monies subscribed represent reinvested dividends will not be affected.

New measures will be introduced to prevent VCTs from returning share capital to investors within 3 years after the end of the VCT’s accounting period in which it issued the shares, and to ensure that the normal time limits for making assessments to recover tax do not prevent HMRC from withdrawing relief in any case where VCT shares are disposed of within 5 years of acquisition.

Current VCT legislation will also be amended so as to enable an individual to subscribe for and hold shares in a VCT via a nominee; this will have effect in relation to shares issued on or after the date of Royal Assent to Finance Act 2014.

Social Investment Relief

A new income tax relief is introduced for investments after 5 April 2014 by individuals in qualifying social enterprises. The relief will equal 30% of the amount invested, and will be deducted from the investor’s income tax liability. The maximum amount qualifying for relief per tax year is £1m, and the investment must be held for at least 3 years. The relief will apply to subscriptions for shares in an enterprise and to certain types of loans made to an enterprise. It can be carried back to the preceding tax year. A number of eligibility conditions will apply.

Capital gains on social enterprise investments to which income tax relief applies will be exempt from capital gains tax provided the investments are held for 3 years. If a sum equal to the amount of a chargeable gain made on any asset after 5 April 2014 is invested in a social enterprise within a period of 4 years beginning 1 year before the gain accrues, the individual may claim for the gain to be treated as arising when the investment is disposed of and not at any earlier time. This is subject to conditions concerning, for example, the nature of the investment and the activity of the enterprise.

Seed Enterprise Investment Scheme (SEIS)

SEIS tax relief was originally meant to be abolished from 6 April 2017. It will now be made permanent. SEIS capital gains tax reinvestment relief, whereby a gain on any asset is tax-free to the extent that it is matched with investments in eligible SEIS shares, will also be made permanent; it was due to expire on 5 April 2014. As was the case in 2013/14, only 50% of the acquisition cost of the SEIS shares can be set against gains in 2014/15 onwards.

Excluding Subsidised Activities from Qualifying for the Venture Capital Schemes

Legislation will be introduced with effect broadly from Royal Assent to Finance Act 2014 to prevent companies from benefiting from investment via the Enterprise Investment Scheme, Seed Enterprise Investment Scheme or Venture Capital Trust scheme when those companies also benefit from Department of Energy & Climate Change Renewable Obligations Certificates or Renewable Heat Incentive subsidies.

Offshore Authorised Investment Funds

With effect from 5 December 2013, authorised investment funds are treated as not resident in the UK if they are established in another State and treated as resident in that State for the purposes of any tax on income imposed under the law of that State.