Ministers to end enterprise scheme abuse

THE GOVERNMENT IS planning to crack down on bogus businesses set up to take advantage of the Enterprise Investment Scheme (EIS).

The Treasury says that bogus small firms are being formed by individuals solely to take advantage of the EIS, which encourages direct shareholdings in small businesses, and the Venture Capital Trusts scheme, which rewards investment in EIC-businesses.

In some cases, a business is set up that employs no staff and subcontracts all its work to larger companies, the This is Money website reports.

The schemes are worth £320m in saved income tax and capital gains tax. The government has launched a consultation to make the schemes even more generous.

The legislation to end the abuse is expected in the 2012 Budget.

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