Recent figures released by HMRC show a record level of funds raised via the Enterprise Investment Scheme (EIS). In the tax year 2021/22, 4,480 companies raised some £2.3bn though the EIS, the highest total since the scheme was introduced in 1994 and surpassing pre-pandemic levels of investment.
London and the south east of England dominate in terms of investment by geographic region, with 65% of all EIS investment in companies located (i.e. with a registered office) in those regions, eclipsing investment in other regions (HMRC notes that the most recent geographic split is similar to that for recent years). The information and communication sector took the largest share of funds raised under the EIS, accounting for 34% of the total. Interestingly, the top four industrial sectors (info and comms, professional scientific and technical, manufacturing, and financial and insurance) together received around £1.6bn in investment – 71% of the total.
Investment in start-ups also saw a step up, with funds raised through the Seed Enterprise Investment Scheme (SEIS) hitting a record high and set to increase further with the expansion of the scheme from 6 April 2023.
For the tax year 2022/23, the figures also show a notable increase in the number of advance assurance requests for EIS and SEIS applications with, so far, around 80% of those applications having been approved.
Commenting on the data, David Brookes, tax partner at BDO sounded a note of caution: ‘The latest figures show an encouraging rebound in the numbers of companies benefitting from the Enterprise Investment and Seed Enterprise Investment Schemes … However, there are growing numbers of advance assurance applications for both EIS and SEIS that are being rejected which is a cause for concern. While it’s absolutely right that the tax authorities are alert to any attempt from parties to benefit from tax reliefs they are not entitled to, there is a growing sense that officials are being a little over-zealous in their interpretation of the rules which is hindering spin outs and follow-on funding for older companies.
‘The complexity of both schemes and their qualifying criteria are also barriers to greater take-up, and there is a strong case for reform. For example, although the gross asset limit for SEIS companies has increased from 6 April 2023, the gross asset test for EIS qualifying companies remains at £15m. This was a figure first introduced 25 years ago. Raising this threshold to take account of inflation could provide an important source of EIS funding for ambitious and growing mid-market businesses that are currently unable to access growth capital.’
Recent figures released by HMRC show a record level of funds raised via the Enterprise Investment Scheme (EIS). In the tax year 2021/22, 4,480 companies raised some £2.3bn though the EIS, the highest total since the scheme was introduced in 1994 and surpassing pre-pandemic levels of investment.
London and the south east of England dominate in terms of investment by geographic region, with 65% of all EIS investment in companies located (i.e. with a registered office) in those regions, eclipsing investment in other regions (HMRC notes that the most recent geographic split is similar to that for recent years). The information and communication sector took the largest share of funds raised under the EIS, accounting for 34% of the total. Interestingly, the top four industrial sectors (info and comms, professional scientific and technical, manufacturing, and financial and insurance) together received around £1.6bn in investment – 71% of the total.
Investment in start-ups also saw a step up, with funds raised through the Seed Enterprise Investment Scheme (SEIS) hitting a record high and set to increase further with the expansion of the scheme from 6 April 2023.
For the tax year 2022/23, the figures also show a notable increase in the number of advance assurance requests for EIS and SEIS applications with, so far, around 80% of those applications having been approved.
Commenting on the data, David Brookes, tax partner at BDO sounded a note of caution: ‘The latest figures show an encouraging rebound in the numbers of companies benefitting from the Enterprise Investment and Seed Enterprise Investment Schemes … However, there are growing numbers of advance assurance applications for both EIS and SEIS that are being rejected which is a cause for concern. While it’s absolutely right that the tax authorities are alert to any attempt from parties to benefit from tax reliefs they are not entitled to, there is a growing sense that officials are being a little over-zealous in their interpretation of the rules which is hindering spin outs and follow-on funding for older companies.
‘The complexity of both schemes and their qualifying criteria are also barriers to greater take-up, and there is a strong case for reform. For example, although the gross asset limit for SEIS companies has increased from 6 April 2023, the gross asset test for EIS qualifying companies remains at £15m. This was a figure first introduced 25 years ago. Raising this threshold to take account of inflation could provide an important source of EIS funding for ambitious and growing mid-market businesses that are currently unable to access growth capital.’
