Companies in the UK have received tax-free investment of over £20 billion since the introduction of the Enterprise Investment Scheme (EIS) in 1993, new figures have revealed.
The finding forms part of HM Revenue & Customs’ (HMRC) new annual report highlighting the number of companies raising funds through the EIS scheme, Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief scheme.
According to the statistics, a total of 29,770 companies have taken advantage of the EIS scheme since it launched more than two decades ago.
The EIS scheme is designed to help new companies raise money by offering tax reliefs to investors who buy new shares in the company. A single business can raise up to £5 million each year, and a maximum of £12 million over the company’s lifetime.
In the last year alone, 3,920 companies raised a total of £1.9 billion under the EIS scheme, with 1,710 of these raising funds for the first time.
Unsurprisingly, firms in the London and South East regions accounted for the largest proportion of investment, with companies in the capital receiving £1.2 billion – or 67 per cent of all investment – in 2017/18.
The figures also highlight the number of firms who took advantage of the SEIS scheme. Much like the EIS scheme, SEIS is one of four venture capital schemes designed to encourage investors to buy new shares in a new company in return for generous tax reliefs.
According to the report, some 12,900 small businesses have used the scheme since it was introduced in 2012, raising over £1 billion of funds.
Commenting on the figures, the report authors said: “There has been a steady increase in EIS since 2010, which could be due to sustained historically low-interest rates, increasing promotion and involvement of fund managers.
“In addition, the change in Income Tax relief from 20 to 30 per cent in 2011-12 and the introduction of the Feed-in Tariffs (FiTs) initiative from April 2010 (resulting in large amounts of investment into the renewable energy sector) both attracted EIS investment. In 2012-13 most trades attracting FiTs were excluded from eligibility for EIS and most companies benefiting from alternative DECC subsidies were excluded from July 2014.
“The increase in the annual EIS investment limit for companies to £5 million from 2012-13 attracted significant investment. The amount of funds raised almost doubled in the period from 2012-13 to 2014-15. Subsidised energy activities were progressively excluded from eligibility for EIS from April 2015, and all energy activities were excluded from April 2016.”