EIS and SEIS contribute to surge in use of government funding schemes

The creation of the Seed Enterprise Investment Scheme (SEIS) has led to a sharp rise in the amount of businesses applying for government funding initiatives.

Government funding schemes are attracting increased interest from start-up companies in the UK.

The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Schemes (SEIS) are being used more, Rockpool Investments finds.

The number of companies which applied to HMRC for approval under EIS and SEIS rose from 2,147 in 2011/12 to 4,075 in 2012/13.

Rockpool says that part of the rise could be attributed to changes brought in back in April 2012 which expanded the scope of EIS, and saw SEIS introduced.

A breakdown of the figures reveals that pre-approval under the EIS scheme climbed by 9 per cent, while 1,729 applications were made under the SEIS initiative.

Nicola Horlick, chairman of Rockpool, comments, ‘It’s great to see the overhaul of the enterprise investment rules working so well, giving a huge boost to SMEs by enabling them to replace vital lost bank funding, and giving investors scope to benefit from significant tax reliefs on their investments.

‘In recent years, EIS has proved to be very appealing for both SMEs and investors, however this huge leap in demand for what was already a very successful scheme shows that the recent reforms are providing a real shot in the arm for Britain’s small and medium-sized companies.’

More on EIS and SEIS:

Under the EIS funding initiate, investors can now invest up to £1 million per annum in qualifying companies and receive 30 per cent initial income tax relief – and can roll over unlimited capital gains into investments and pay no capital gains tax on assets disposed of after three years.

The SEIS scheme, which addresses those with few than 25 staff and assets of less than £200,000, allows investments of up to £100,000 per year from individuals. Those investing through SEIS can receive 50 per cent tax relief in the tax year and the investment is made and profits made after a qualifying period are tax free.

Horlick adds, ‘Given that the tax breaks available for EIS are far more attractive right now than they are for VCTs – the other route for private individuals to invest in unquoted companies – we expect to see demand for EIS remain robust for the foreseeable future.’

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Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.