The Institute of Directors is calling for the government to do all it can to raise awareness of schemes that have the potential to unlock “billions of pounds in business investment” and create a new generation of investors
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) give investors tax relief when they invest in small, privately-owned companies and are designed to promote investment into this vital part of the economy.
“Rapid growth in the take-up of both EIS and SEIS by companies and investors shows they have the potential to unlock billions of pounds in business investment,” says Jimmy McLoughlin, deputy director of policy at the IoD.
“More than 100,000 people invested in a company through the schemes last year,” McLoughlin points out. “But there is no reason that number cannot be 10 times as high.”
The IoD will be releasing a report next month outlining how the government can expand these schemes and tap in to the great appetite for investing and growth in the UK’s alternative finance markets.
“Investing in a business should be as easy as opening an ISA,” says McLoughlin. “But for millions of people this isn’t the case. The process is excessively complicated, time-consuming and daunting. The government needs to play its part in encouraging a step-change in the way investment schemes are regulated. EIS and SEIS should be actively promoted and made as simple as possible to invest through.”
People investing through EIS qualify for 30 per cent tax relief and those using SEIS, which is aimed at companies with fewer than 25 employees and younger than two years old, can offset up to 50 per cent of their investment. Updated figures released this week showed that companies raised around £1.5bn through the schemes in 2013-14, with more than 100,000 people investing.
“With Britain leading the European alternative finance market, entrepreneurs in the UK can raise funds in more ways than ever before,” adds McLoughlin. “Now it’s time to open up the nascent ‘equity economy’ beyond the wealthy and well-connected in the South East.”