Business advisers at BDO Stoy Hayward claim that investors in unquoted UK small- and medium-sized enterprises (SMEs) are to forego tax reliefs available through Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT) if share issue proceeds are used by a European subsidiary, or go towards trade conducted mostly outside the UK.
The firm says UK companies branching out into Europe are being discriminated against and forced to limit trading mainly to the UK so that investors can qualify for EIS and VCT help.
"If a UK entrepreneur saw an opening for expanding operations by means of a presence in Germany and raised funds through a share issue, then UK investors in that company would not receive tax reliefs on the investment," said Stephen Herring, tax partner at BDO.
