Smaller high risk companies raise record funds from EIS and SEIS tax relief schemes

New figures from HMRC show that 3,265 companies raised a record £1.8bn of funds under the Enterprise Investment Scheme in 2014-15, a 14 per cent rise on the previous year.

During the same period, 2,290 companies received investment through the Seed Enterprise Investment Scheme and £175m of funds were raised, a 3 per cent rise on the previous year.

The Enterprise Investment Scheme and Seed Enterprise Investment Schemes are tax-based Venture Capital Schemes designed to help smaller higher-risk trading companies raise finance.

Commenting on the new figures, Rob Donaldson, RSM’s head of corporate finance said:

‘In the current era of financial repression, with yields across all asset classes being crushed by the impact of unconventional monetary policy, there is clearly a growing appetite among investors for higher risk, higher reward investments and the tax reliefs on offer via these schemes are proving to be very popular.

‘The result has been a funding boost for smaller high risk companies. Indeed, the latest figures reveal that there were a record number of companies raising funds under the Enterprise Investment Scheme for the first time.

‘While many UK companies are benefitting from these schemes, there is a significant regional imbalance with companies in London and the South East receiving 65 per cent of EIS investment. By contrast, companies in the North East received less than 1 per cent over the same period. There is clearly an opportunity here for companies north of the Watford Gap to look more closely at these schemes as a means of securing growth funding.

‘Sector-wise, the business services sector has been the biggest beneficiary of EIS investments, which have trebled in three years from £200m in 2012-13 to £604.7m in 2014-15. However, EIS investments in hi-tech companies have also risen significantly from £197m in 2012-13 to £349m in 2014-15, a rise of 77 per cent.’