Start-up investors have called for the government to clarify what the “Windsor framework” agreement will mean for a key tax incentive amid uncertainty over its future.

Lord Leigh of Hurley, co-founder of Cavendish Corporate Finance, said the deal with the European Union to end the deadlock over the Northern Ireland protocol should mean the Enterprise Investment Scheme can be expanded.

Leigh said the deal should mean the UK is no longer restricted by EU state aid restrictions, so can commit to the future of the scheme, which provides generous tax incentives for investors in private companies.

In 2020 to 2021, 3,755 companies raised a total of £1.7 billion under the EIS scheme, which underpins a significant proportion of equity investment in early stage firms by private individuals.

“As we decide how to plough our own path post-Brexit, it is important that we are entirely free to create our own rules concerning subsidies that might amount to state aid,” Leigh said.

When EU approval was last obtained for EIS in 2015, a “sunset clause” was included, meaning the incentives need to be reviewed and renewed by April 2025.

The government was reluctant to deal with this issue until problems with Northern Ireland trade were resolved.

Under the Windsor framework, the circumstances under which the EU can bring action against the UK for subsidies in Northern Ireland that go against EU state aid rules have been tightened.

Leigh said EIS had been “hampered by restrictions” and that it is “clear” that England, Scotland and Wales are no longer covered by the state aid rules.

John Glencross, chief executive and co-founder of Calculus Capital, said the deal should mean the government can “remove the sunset clause without EU approval and we hope this will be addressed in the upcoming Finance Bill” after this month’s budget statement.