Small and Medium Firms Raise over £1bn in Investment through EIS tax incentive scheme

More than a thousand start-ups obtain finance through the Seed Enterprise Investment Scheme

The government’s Enterprise Investment Scheme (EIS), which launched in 1993 but was revised in 2012, has funded 2,400 small and mid-sized firms with investment totalling over £1bn, according to a new report.

Additionally, EIS sister programme the Seed Enterprise Scheme (SEIS), which launched in 2012, has been found to have backed funding in 1,120 start-ups with investment totalling£83.7m altogether.

In 2012 the government reformed EIS, enabling investors to fund larger businesses with more investment and to receive better tax breaks. The changes included increasing the maximum investment to £1m, eligibility to companies with staff numbers of up to 250 and revenues to £15m.

Since the changes were introduced, the schemes have gradually been gathering traction.

The EIS provides an initial 30% tax relief on investments of up to £1m for companies not listed on the stock market whereas SEIS is aimed at early stage companies and offers investors 50% income tax relief. There are no capital gains tax on profits or inheritance tax for both EIS and SEIS schemes.

Gary Robins, director at finance company Radius Equity – who released the report – commented on the research;

“This is a very encouraging start for the SEIS scheme. It demonstrates that there is significant demand from both start-ups looking for vital capital to grow and private investors keen to back ambitious entrepreneurs with promising business models in a tax efficient way.

“Take up of EIS is really powering ahead. Small and medium enterprises are increasingly seeing it as a pragmatic way round the funding gap left by continuing constraints in bank lending, making the most of private investor appetite for unquoted growth businesses.”