The government seems to be doing a really good job in assisting small to medium sized businesses flourish in the UK. In 2013-2014 nearly 2000 small to medium sized businesses received £163m million in financing under the Seed Enterprise Investment Scheme (SEIS). Enterprise Investment Scheme (EIS) also saw a similar boost with almost 22,900 companies raising over £12.2bn of funds in 2013-14. In total, both government-backed schemes have raised £1.5 billion so far.
These schemes have gained much traction in the last few years as there are now a very limited number of schemes offering such tax reliefs to investors. EIS was introduced way back in 1994 to encourage investment in smaller high-risk companies, by providing investors with up to 30% of their investment back in income tax relief. SIES is a more recent addition; introduced in 2012 to encourage investment in recently incorporated companies by providing individuals with 50% of their investment back in income tax relief. An additional 50% CGT exemption was offered in 2014/2015 on gains that are reinvested in SEIS eligible shares.
HMRC has stated that the number of businesses acquiring funds from private investors from EIS has grown by 10% from 2013 to 2014. Also businesses acquiring funds through SEIS from 2013 to 2014 increased from 1155 to 1995 which is a massive 73% growth. Another interesting bit of information HMRC revealed is that in 2014 alone, 1695 businesses grew revenue through SEIS for the first time.
The government has implemented a number of initiatives in the past with the intention of supporting small to medium sized businesses. In addition to assisting businesses the government’s primary interest is to facilitate growth and jump start the economy.
If you are a small to medium business owner or are looking to open your own business these schemes can be of tremendous value. However, it’s very important to be aware of all the procedures that go into setting up the scheme. If you feel overwhelmed or confused by the requirements be sure to speak to your accountant or a professional advisor before beginning the process.