EIS/SEIS: Growing Numbers
Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) play a key role in economic growth in the UK. EIS and SEIS are not only legitimate tax planning tools but are also an important means of channelling much-needed equity capital into early stage and developing UK entrepreneurial companies. This investment fuels innovation and growth in employment and is vital for the growth of the wider economy.
The success of Enterprise Investment Scheme is borne out by recent figures released by HMRC*.
- In 2013-14, the total amount raised by companies via EIS was over £1.5 billion which now surpasses the previous peak of £1 billion in 2000-01, the peak of the dot-com boom.
- The number of companies raising funds showed an increase on the previous year, as did the number of companies raising funds for the first time.
- The number of companies raising funds and the amount raised is still by far the highest in London and the South East compared to the rest of the country, with High Tech and Business Services leading the way in terms of investment by industry sector.
The success of EIS relates in part to the 2012 changes in government legislation.
- An increase in EIS income tax relief from 20% to 30%;
- An increase in the annual cap for investment into an EIS company from £2m to £5m;
- An increase in the gross assets test for companies from £7million to £15million pre new money;
- An increase in the maximum number of employees allowed from 50 to 250.
These changes allowed investors to invest in larger later stage companies which are arguably less risky.
Seed Enterprise Investment Scheme was introduced in 2012 with more generous tax breaks to encourage investment in higher risk start-up and earlier stage companies.
- In 2013-14, 2,030 companies raised £166 million through SEIS which is significantly higher than the 1,160 companies raising a total of £86 million under SEIS in 2012-13.
- Over 1,700 companies of these companies were raising funds under SEIS for the first time in 2013-14 – representing £150 million in investment.
- In 2013-14, companies from the Hi-tech, Business services, and Distribution, restaurants and catering sector made up 66% of the amount of SEIS investment received.
These EIS and SEIS schemes have not only allowed investors to take advantage of the tax relief available but have also encouraged investors to play a vital role in assisting SMEs to develop and succeed.
At the EIS Association (EISA), we are constantly seeking ways to enhance the EIS by working closely with HM Treasury, HM Revenue and Customs, Government Ministers, MPs and the FCA. We also promote the benefits of the scheme to investors and companies using EIS/SEIS and their respective advisers.
Given that we are seeing increasing levels of interest and investment into EIS qualifying companies and funds, it is vital that financial advisers and wealth managers are fully aware of how the Enterprise Investment Scheme operates, including the ways to invest in EIS companies and funds and which investors these investments are appropriate for. As such, EISA in conjunction with Tolley® Exam Training, have launched the Enterprise Investment Scheme Diploma.
Scope of the Diploma:
The EIS Diploma is a comprehensive, self-study diploma covering all aspects of EIS, including the tax implications, regulatory aspects and the wider funds and schemes landscape. It demonstrates effective ways to utilise investments efficiently to maximise the benefits in an easy to understand manner.
Who should apply?
The EISA Diploma aims to give Independent Financial Advisors and Wealth Managers an overview of EIS and SEIS, so they can advise their clients with confidence in this rapidly growing area of investment.
Indirect benefits to individual investors
EIS/SEIS is a rapidly expanding industry, which is attracting greater numbers of individual investors for whom the issues surrounding legislation, regulation and tax relief can be complex. By using the services of a financial planner or advisor who has passed the Diploma, individual investors can be confident that the advice they receive is up to date and accurate.