Question proposed, That the clause stand part of the Bill.

Again I would like to reiterate my support for seed EIS and the particular aspect of reinvestment relief. The idea behind reinvestment relief is to turbo-charge the incentives that people have to step up to the plate with this particular opportunity. The idea was that in the first year of seed EIS, angel investors would get not only 50% of their income tax but this idea of roll-over relief. If they made a capital gains, they could then reinvest that in year one and get an extra 28% on the relief for making an investment, thereby  taking up the relief to 78% on a particular investment. As the Minister is well aware, over the last six months of last year, particularly over the summer, I travelled to 14 different cities promoting that concept. One of the points made to me was that during its introduction the message did not get off the ground and into the market as fast as it could have done.

Several entrepreneurs have asked why the reinvestment relief was not given for a longer period. I congratulate the Government on listening to what business people have said and extending that roll-over relief on reinvestment, but will the Minister tell us why he is only allowing 50% of it rather than 100% this year, given that such important schemes take time to get out into the market? I encourage the Government to let another full year go by where 100% rather than 50% of the qualifying funds reinvested get the relief. Perhaps the Minister could address that point as well.

Again it is a pleasure to follow the hon. Member for Braintree. He raised the question that I wanted to put to the Minister, so I too would be grateful for a reply. Obviously, the measure was originally introduced in 2012-13 and has been extended to cover the gains accruing to the investor in 2013-14, but it provides that only half of the invested amount can be set against chargeable gains. Will the Minister clarify the thinking behind that reduction and tell us what assessment has been made? I appreciate that, in response to the discussion on the previous clause, the Minister explained the number of companies that have been improved and the current investment rates, but have the Government anticipated a slowing up or a reduction as a result of the reduced reinvestment allowance? It would be helpful to the Committee if the Minister could respond to those issues and those raised by the hon. Member for Braintree.

Clause 56 provides for a limited extension of the capital gains tax holiday component of the seed enterprise investment scheme. The change will help to ensure that the momentum the scheme has built up during the past year continues and that more investors take advantage of the tax reliefs, and put their money into young, start-up companies.

As we have heard, SEIS was introduced by the Government last year to provide vital financing support for start-up companies. The scheme is proving to be successful. It has received nearly 2,000 expressions of interest from companies seeking to have official assurance that they can use it. On top of the headline 50% income tax relief, the scheme was introduced with a one-year capital gains tax holiday to give it a kick-start and to build interest, and it is that element that will be extended under the clause.

The Government are keen to maintain the momentum—I gave some figures a moment ago—and continue to channel more funding into start-up companies. We are therefore extending the CGT holiday under the clause at a limited rate for another year to gains realised in 2013-14. We regard that as a sensible approach. It means that investors making capital gains in 2013-14 will receive a 50% capital gains tax relief when they reinvest those gains into seed companies in either 2013-14 or 2014-15.

I was asked why we are not continuing the 100% holiday. The CGT holiday was always set out as a temporary measure to kick-start the scheme and create a buzz—that is not a technical tax word. The scheme has worked well and it is picking up some real momentum and interest.

It is also fair to say that we recognise that a full CGT exemption allowed some investors, albeit in fairly unusual circumstances, to benefit from more than 100% tax relief. That could have been damaging to the scheme’s reputation in the long term. We therefore believe that a 50% CGT relief in the second year of the scheme strikes a good balance by offering support to a relatively new scheme without providing over-generous tax incentives. As we are now more than a year on in the life of SEIS and given that awareness increases over time, not least because of the excellent activities of my hon. Friend the Member for Braintree and the efforts of Lord Young, we consider a 50% rate of CGT for the second year strikes the right balance.

In conclusion, the clause provides a limited extension to the capital gains tax holiday component of SEIS. The changes will continue to help momentum in investment in SEIS, thereby ensuring more investment in young, innovative start-up companies, and I hope that the clause will be accepted.

Question put and agreed to.

Clause 56 accordingly ordered to stand part of the Bill.