Sunday, April 5, 2020

Entrepreneurs Raise Billions From Tax-Efficient Investments

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Savvy investors have ploughed cash worth billions into tax efficient savings, the latest official data shows.

HM Revenue & Customs oversees three investment schemes offering generous tax breaks, raising almost £3 billion in the 2017-18 tax year.

The Enterprise Investment Scheme (EIS) attracted the most cash – £1.9 billion going to 3,920 companies, says the HMRC data release.

The figures were in line with the previous tax year, when 3,655 companies raised £1.9 billion.

More than 1,700 companies attracted £759 million of funding for the first time through EIS.

The most popular investment sector was information and communications, accounting for £641 million – a third of all EIS funding raised.

Most of the money went to London and the South East, around £1.2 billion or 67% of all EIS investment in the tax year.

EIS offers a 30% tax refund on investments of up to £1 million in a tax year. Any growth in shares is free of capital gains tax.

Since EIS was launched in 1993-94, 29,770 companies have received investment and over £20 billion of funds have been raised.

SEIS breaks £1 billion barrier

The Seed Enterprise Investment Scheme (SEIS) has similar terms to EIS but offers investment to start-up companies.

In 2017-18, 2,320 SEIS companies raised  £189 million, compared with 2,425 firms raising £187 million in the year before.

More than 1,700 companies raised £159 million of funding for the time.

Like EIS, the busiest sector was information and communications, accounting for £69 million of investment – a share of 37% of all funds raised.

Most of the money also went to London and the South East, around £117 million or 67% of all SEIS investment in the tax year.

SEIS offers a 50% tax refund on investments of up to £100,000 in a tax year. Like EIS, growth in share values is free of capital gains tax.

Since SEIS was launched in 2012-13, 12,900 companies have received investment and over £1 billion of funds have been raised.

SITR dips

In 2017-18, Social Investment Tax Relief (SITR) collected £1.4 million for 20 social enterprises – down from £2.5 million raised by 30 enterprises in the previous tax year.

Since SITR was launched in 2014-15, 80 social enterprises have raised funds of £6.7 million through the scheme.

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