New data from HM Revenue & Customs (HMRC) shows that businesses in London and the South East account for 66 per cent of the Enterprise Investment Schemes (EIS) uptake.
Despite accounting for 62 per cent of the UK economy, businesses outside London and the South-East only account for £610 million out of nearly £1.9 billion of EIS investments.
The report shows that since the EIS was created in 1993/94, 26,355 companies have received investment worth almost £16.2 billion.
In 2015-16, the last year for which data is available, 3,470 companies raised a total of £1.88 billion of funds under the EIS scheme.
In comparison in the year before some 3,370 companies used the EIS, 100 less than the following year, but they managed to raise £1.92 billion of funds – £41 million more.
The EIS is designed to help small businesses raise finance and offer appealing incentives for investors who purchase new company shares.
The scheme offers Income Tax relief of up to 30 per cent, as well as possible Capital Gains Tax exemptions and deferral to investors who buy new shares in the company.
Data from HMRC also showed that one sector, in particular, dominated the use of EIS. Companies from the business services sector accounted for over £800 million of investment – more than 40 per cent of all EIS investment – in 2015/16.
The latest data also looked at the Seed Enterprise Investment Scheme (SEIS). This can carry more risk than the EIS, but there is substantial tax relief available to offset potential losses. Investors may invest up to £100,000 per tax year and claim back 50 per cent tax relief regardless of their marginal rate of Income Tax, which makes it particularly useful for those wanting to put in larger sums of money.
Key findings for SEIS data from HMRC include:
- In 2015/16, 2,360 companies received investment through the SEIS and £180 million of funds were raised.
- In comparison 2014/15 saw 2,365 companies raise a total of £180 million.
- Over 1,800 of these companies raised money under SEIS for the first time in 2015/16, representing £154 million in investment.
- The tech and business services sectors made up 68 per cent of all SEIS investment received.
With the end of the tax year fast approaching now is the perfect time to consider the use of EIS and SEIS as part of your annual tax plan.
At Milsted Langdon, our award-winning tax team can help you prepare for the end of the tax, ensuring that you minimise your tax liabilities wherever possible. Please contact us to find out more.