The Enterprise Investment Scheme Association (EISA), the membership organisation responsible for advising the government on the best conditions to encourage private investors to support growth businesses through the Seed and Enterprise Investment Schemes (SEIS and EIS), has written to the Chancellor with a seven point wish list ahead of the forthcoming budget.
Director General of the EISA, Mark Brownridge, emphasised the critical role the EIS tax incentives have played since the scheme was launched, raising over £22 billion for over 30,000 businesses, but highlighted the investment gap that still needs to be addressed. “Recent survey work indicates that over £6.5 billion of private sector equity investment is still needed by growing businesses, and the economic uncertainties caused both by Covid-19, and Brexit led to a further shortfall of over £350 million. As we exit the current pandemic it has never been more important for the Chancellor to incentivise private investment in the country’s fast growth businesses.
We have set out seven issues that we would like the Chancellor to address in the forthcoming Budget.
In setting these out we have focused on ensuring that our recommendations are tax neutral, support the government objective of rebalancing the economic opportunities between the south, which currently attracts nearly 80% of investment, and the Midlands and North, and are job creative.”
The recommendations being put before the Chancellor are:
• Increase the limit for the Seed investment stage from £150,000 to £250,000.
“The incentives available under the SEIS terms mean that there is a strong appetite from investors to support businesses at the seed stage. Increasing the amount that a business can raise under SEIS will provide an important stimulus to growth right now with market estimates that by doing so would raise a further £500 million,” maintains Mark Brownridge.
• Confirmation that the schemes will continue beyond the current 2025 sunset, to give both businesses and investors the reassurance that they need to remain confident of ongoing funding.
• Amend the EUs State Aid and Risk Finance Guidelines. Having left the EU, there are clearly changes to the State Aid legislation, which urgently need clarifying.
• Change the current restrictions on businesses using the EIS and SEIS schemes from ‘the age of the business’ to ‘the size of the business’, with the objective of opening the schemes to more businesses and enabling more growth and employment as a result.
• Reduce the administration burden for businesses looking to use the schemes. The current guidelines have been put together over the past 25 years and are now too complicated and cumbersome for most early stage businesses. Reducing both the complexity and administration would help to drive the use of the schemes.
• At the same time as reducing the administration and complexity, address technical inconsistencies that arise when one EIS supported business buys another that has benefited from SEIS investment.
• Make more businesses and investors aware of the schemes. “Whilst businesses’ understanding of the various types of alternative funding is improving,” says Mark Brownridge, “ there is still plenty more that can be done to highlight the importance of EIS and SEIS in providing the necessary growth funding that may well not be available from other more traditional sources.”
Lord Howard Flight, Chair of the EISA added his support to the recommendations to the Chancellor. “Ensuring that the businesses with real growth potential have access to the investment that they need is critical to the UK’s recovery from the current pandemic. The SEIS and EIS schemes will play a major part in this in attracting the all-important private sector investment, and we look to the Chancellor to do all he can in his forthcoming statement to simplify, promote and extend the terms of the schemes so that we can be sure that every pound of investment is put to good use.”