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EIS and SEIS sees decline in interest after regulatory changes

Recent changes to the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) have led to a fall in interest, a new report has revealed.

The study, published by private investor network Growthdeck, shows that HM Revenue & Customs (HMRC) expects to grant just £775 million in tax relief to investors in the current tax year.

This is compared to £830 million last year – marking a notable fall in investment.

Likewise, the number of investors claiming tax relief through EIS fell to 33,190 in 2017-18, down from 33,610 in 2016-17 and 35,580 in 2015-16.

Meanwhile, the value of funding raised by enterprises using EISs also fell for the first time by 10 per cent.

The figures come after the Treasury implemented new rules enforcing what type of companies investors can invest in using tax-saving investment schemes.

A major change came in the form of redefining eligible companies as ‘knowledge-intensive’, rather than ‘asset-based’.

A business is classed as ‘knowledge-intensive’ if it is developing Intellectual Property (IP) that is expected to be the company’s main source of revenue 10 years from the date the company receives investment.

However, the schemes still offer attractive tax breaks of up to 50 per cent of investment value.

Commenting on the study, Gary Robins, head of business development at Growthdeck, called for policymakers to widen the scope of the investment schemes.

“Brexit uncertainties have slowed lending by UK banks to SMEs. Some simple reforms to EIS could help fill that gap by increasing funding from private investors,” he said.

“It is time to cut red tape, reverse restrictions and use the scheme to help keep the post-Brexit economy growing.”

If you’re an early-stage start-up and would like to look at funding options, please get in touch. We have the experience required to lead entrepreneurs through the investment process, from Seed funding rounds to private investment and more.

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John Morgan

John Morgan

Senior Associate – Corporate / Commercial at Mander Hadley Solicitors
A law graduate of Warwick University, I trained and qualified as a solicitor in London in 1977 before spending several years in the Middle East where I acted on major corporate, commercial and banking transactions, many with an international aspect.

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