10 May 2017 08:00
Disappointing take-up for SME investment schemes
Newly-released figures from HMRC show that there has been a significant decline in the amount of funding raised by companies using Enterprise Investment Scheme tax relief.
Accountancy group Smith & Williamson has blamed the fall on Government changes to tax rules made in the past two years. Ray Abercromby, partner in business tax at Smith & Williamson, said:
"The constant tinkering with these Government-backed tax schemes is causing uncertainty for small businesses and investors alike.
"The changes have forced individuals, who just want to get on and grow their business, to focus on the structure of the business in case they accidentally fall foul of the rules. At first glance, the changes appeared to discourage investment in the UK's small and scale-up businesses, the lifeblood of our economy, and these statistics indicate that could be the case."
The EIS scheme offers income tax relief to investors and a capital gains tax exemption on the disposal of shares (if sold after a qualifying three year period). However, according to Smith & Williamson,
"the rules and structures surrounding the use of, and claiming of, the relief have become increasingly complicated in recent years".
Jamie Kerr, head of entrepreneurship and tech policy at the Institute of Directors (IoD), said:
"The number of UK companies applying for permission to receive investment through the Seed Enterprise Investment Scheme is rising at a painfully slow pace. This relief, alongside its older brother the Enterprise Investment Scheme, has been a welcome addition for start-ups looking to raise funds, but we believe more value can be squeezed out of the scheme."