Changes to the enterprise investment scheme (EIS) and venture capital trusts (VCTs) announced in the government's budget today have been welcomed by the industry.

Chancellor George Osborne announced today that income tax relief on EIS would be raised to 30 per cent from April.

From April 2012 the investment limit for EIS will be raised to £1 million and the investee company qualifying limits will also be raised to companies with 250 employees and gross assets of £15 million

The government is also set to consult on simplification of the EIS rules and refocusing both EIS and VCTs to ensure they are targeted at 'genuine risk capital investments'.

Ian Sayers, director general of the Association of Investment Companies (AIC) said expanding the range of companies that VCTs could invest was a 'welcome boost'.

He said, 'The withdrawal of bank finance and current challenging market conditions have increased the difficulties facing smaller companies seeking capital.

'Unfortunately the ability of Venture Capital Trusts to channel funds to these businesses has been limited by European rules.'

Patrick Connolly, head of communications at AWD Chase de Vere, said although the changes were to be welcomed but warned that some risks remained.

He said that increasing initial tax relief on EIS could attract investors for whom the products were not suitable.

Connolly added, 'EIS and VCTs are both designed to support small enterprises and investors are given attractive tax benefits because these investments should carry high levels of risk.

'We have seen some VCT providers, while abiding to the letter of the law, not necessarily sticking to its spirit by offering seemingly lower risk products which don’t genuinely help small companies.'