Hospitality Today Aug-Sep 2016 - Page 25 | 25 Any time spent selling its produce and services during the market research stage would not count. A new cap of £12 million has also been introduced on the total amount of investments a company may raise under VCT or other risk finance investment. Any risk finance investments used by a business previously owned by another company will count towards the total funding limit. Why has the government changed the rules? In the March 2015 budget, the government announced that it intended to implement measures to bring VCT schemes and social investment tax relief in line with current EU regulations. What is the real impact for businesses and are pubs the biggest victims of these changes? The government has stated that the new rules should have a negligible effect on all businesses, not just those in the hospitality industry. A business can still obtain investment, but what is not permitted, is for VCT investment to be used to purchase the business. More than 95% of the businesses which were eligible for VCT investment prior to November 2015 will remain eligible under the new scheme. VCT schemes are considered to be a form of “state aid” as they offer highly favourable tax-advantaged investment. The only real impact the government predicts will be on individual VCT investors who had been expecting to make particular investments into companies, and will no longer be eligible for tax relief on certain investments. State aid is prohibited under EU law as it is believed to affect free trade between Member States. The new rules do not appear to substantially affect the way in which VCTs work. The new rules are intended to ensure that investment by these trusts abides with European Commission guidelines, which generally encourages investment in small and medium businesses rather than those that are already established. So, despite the concern, the impact appears to be a bit of a storm in a teacup. The government clearly understands that there is an important place for VCT schemes. The focus remains on investment in small and medium sized businesses. Susanna Gilmartin (above, left) is a Partner and Rahanna Choudhury (above, right) is Trainee Solicitor, Employment, at Thomson Snell & Passmore LLP