Fund managers are worried that a Brexit trade deal will see the government scrap or restrict tax breaks on hugely successful investment schemes that have raised billions of pounds for businesses.
The Enterprise Investment Scheme Association (EISA) wants the government to overhaul the Enterprise Investment Scheme and Seed Enterprise Investment Scheme now the UK has left Europe.
In 25 years, EIS and SEIS have raised more than £20 billion for new and expanding companies in return for offering investors hefty tax breaks.
EISA is urging the government to make several changes to make the schemes even more attractive to investors:
- Take the lid off or scrap investment limits, currently £100,000 a year for SEIS and £1 million for EIS with some exceptions for ‘knowledge-based’ companies
- Commit to the schemes for at least seven years to bolster investor and business confidence
- Streamline administration to make claiming tax breaks easier
- Better promote the schemes to entrepreneurs and research organisations
- Relax European Union state aid rules holding back investment as soon as practicable
Government urged to relax EU state aid rules
EISA Director General Mark Brownridge said: “For 25 years the Enterprise Investment Scheme (EIS) and the Seed Investment Scheme have been helping start, and scale up, businesses who have struggled to gain access to funding.
“As we now look to negotiate what our independent future looks like, we have the opportunity not just to ensure that these schemes continue, but that they are improved to provide even greater support to this vital sector of our economy.
“There will be a lot to cover as the negotiations for our future relationship now progress. Protecting schemes that underpin the availability of capital for new growth businesses is critical, and we will look to work closely with the relevant departments to ensure we achieve the best outcome possible.”
Market leading tax breaks
SEIS offers investors market-leading tax breaks of up to 50% relief on income tax paid on investments of up to £100,000 a year, plus no capital gains tax on share growth and loss relief if a deal turns sour.
Investments must be tied into a company for three years to qualify for tax relief.
SEIS companies are start-ups with little or no trading history.
EIS provides 30% income tax relief and the same capital gains tax advantages as SEIS again over three years.
Companies seeking EIS funding tend to be start-ups or fast-growing businesses.