HMRC’s latest figures show a growth in companies seeking funding through the Enterprise Investment Schemes (EIS) and the Seed Enterprise Investment Schemes (SEIS) in the UK.
In 2014-15, 3,265 companies raised £1.8 billion through EIS funding and 2,290 companies raised £175 million through SEIS funding which is an increase of 425 companies and £225 million more on EIS and 255 companies raising £125 million more in SEIS compared with 2013-14. The vast majority of these figures were for companies based in London and the South East of England, and there is a great deal of work taking place in the Country at large. Although these figures were, obviously, from before the EU referendum and do not show the impact of Brexit on EIS and SEIS funding, they do show that more and more companies are seeking EIS and SEIS funding to grow and expand their businesses.
EIS and SEIS are tax arrangements that encourage investment in unlisted companies which are seen as riskier than listed companies. The tax benefits are only available after three years, which means that the schemes lock-in investors which allows smaller businesses to scale-up and develop in a more stable environment.
Companies with up to 25 employees and with gross assets of less than £200,000 that are looking for money to develop and scale-up may be eligible for investment through SEIS. In addition, they may be eligible to enhance their own position through taxation and other means. SEIS can grant investors reliefs in income tax of up to 50% on investments worth up to £100,000 as well as reductions in Capital Gains Tax (CGT) and Inheritance Tax (IHT).
Likewise, bigger, unlisted companies are eligible for EIS funding. Investors who invest in EIS schemes can invest in up to £1,000,000 in each tax year and are eligible for up to 30% income tax relief as well as relief on capital gains tax and inheritance tax. Together, investments in EIS and SEIS provide a strong incentive to let people invest in growing companies.
Edwin Coe LLP is the leading EIS law firm specialising in SEIS and EIS fund and investment work. We regularly feature in the annual EIS Association Awards and received Highly Commended for the Best EIS Legal Adviser 2014.
If you would like any further information about this or related topics, please contact our Partner Victor Hawrych.
Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.