There has been a fall in investment of around 12 per cent in the Enterprise Investment Scheme (EIS), largely caused by the effects of the pandemic.
But that figure was slightly offset by a surge in the sister programme, the Seed Enterprise Investment Scheme (SEIS), which showed an increase of four per cent.
According to HM Revenue & Customs (HMRC), money invested through the EIS, which helps newer firms to find funds to scale up operations, decreased by that figure in the 2020/21 tax year.
The figures reveal that 3,755 companies raised funds under the scheme, which was 11 per cent down on the previous tax year.
The figures confirm a slowdown over the first three quarters of 20/21 tax year, which was the height of the pandemic.
The trend was reversed however, in the last quarter of the tax year, where it rebounded back to pre-pandemic levels. The upward trend is expected to continue as awareness and opportunities to access EIS funding increases.
Better news was the money invested through SEIS, which invests in earlier stage start-ups, was up four per cent, increasing to £175 million across 2,065 companies.
How does the EIS scheme work?
Under EIS, you can raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime.
This also includes amounts received from other venture capital schemes. Your company must receive investment under a venture capital scheme within seven years of its first commercial sale.
The scheme rules must be followed so that investors can claim and keep EIS tax reliefs relating to their shares.
Tax reliefs will be withheld or withdrawn from investors if the rules are not followed for at least three years after the investment is made.
There are different rules for companies that carry out a significant amount of research, development or innovation, and either:
What is the difference with SEIS?
The Seed Enterprise Investment Scheme (SEIS) is a scheme designed to complement the EIS.
It helps companies raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in your company.
Firms can receive a maximum of £150,000 through SEIS investments.
However, because firms of this kind are riskier, there are two important differences:
What kind of companies qualify for SEIS?
To be SEIS-qualifying, a firm must be small and unquoted, have traded for a maximum of two years, have gross assets of less than £200,000 and fewer than 25 employees at the time of investment.
As with EIS, some companies and sectors are excluded, including those dealing in land, commodities, or shares.
For help and advice on related matters please contact our expert team.
“Richard Anthony case study – Terry Lewis – Jaques Samuel Pianos Widely considered to be London’s leading piano retailer, Jaques Samuel Pianos has grown considerably from its humble beginnings in the front room of Mr Samuel’s home in Notting Hill. They are now internationally recognised and have provided pianos for high-profile clients like Queen and […]”
Terry Lewis – Jaques Samuel Pianos
“Richard Anthony: ‘a super-star firm’ MT Finance is a property finance lender, specialising in bridging loans and auction finance. They assist numerous property professionals, business owners, and individuals with their finance requirements and specialise in short-term asset-based lending. Founder and Director, Tomer Aboody, knew that as an asset-based lender, the business would require an expert […]”
Tomer Aboody – MT Finance
“A family fairground success story The Botton family have been running a traditional fairground, arcade and amusement park in the heart of Skegness since taking over the Pleasure Beach in 1965. Jim, the Director of the company, took over from his father and now heads day-to-day activities and administration. He said: “The Pleasure Beach is […]”
Jim Botton – Pleasure Beach (Skegness)