Start-ups secure over £80m of funding in first year of new tax efficient seed investment scheme
Over £1bn raised by larger SMEs through EIS scheme
Business start-ups have raised £83.7m of seed funding through SEIS, a new tax efficient investment scheme, in the first year* since it was set up by the government – but there is still significant potential for take-up to grow, said Radius Equity, the provider of tax efficient private equity investments.
Latest figures reveal that, in total, 1,120 small companies secured funding through the Seed Enterprise Investment Scheme (SEIS), which was set up in 2012 to boost investment in start-ups and early stage businesses by offering generous tax reliefs to private investors.
Gary Robins, director at Radius Equity, said: “This is a very encouraging start for the SEIS scheme. It demonstrates that there is significant demand from both start-ups looking for vital capital to grow and private investors keen to back ambitious entrepreneurs with promising business models in a tax efficient way.
“However, the likelihood is that this is only scratching the surface. As the scheme beds down and awareness of it grows, there is bound to be more scope to tap latent demand, and enable greater numbers of high-growth businesses to access the capital they need to achieve their potential.”
Investee companies are allowed a maximum of £150,000 investment in total through the SEIS. Investors receive 50% tax relief in the tax year the investment is made.
Hi Tech companies account for largest proportion of funds invested under SEIS
Radius Equity adds that hi-tech companies account for the largest proportion of funds invested under SEIS at 32% of all funds invested. Business services come second at 22.1% of all funds invested.
Over £1bn raised by larger SMEs through EIS scheme
Radius Equity points out that a comparison with SEIS longer-established sister scheme, the Enterprise Investment Scheme (EIS) – emphasises the appeal of tax efficient investment schemes and highlights the potential for growth in take-up of SEIS.
In the same year*, over £1bn of investment was raised by nearly 2,400 SMEs through EIS.
EIS was launched in 1993 and is aimed at slightly larger and more established SMEs looking to fund the next stage of their growth. Its scope was expanded in 2012 to enable more capital to be invested in bigger companies across a wider range of sectors.
Gary said: “Take up of EIS is really powering ahead. SMEs are increasingly seeing it as a pragmatic way round the funding gap left by continuing constraints in bank lending, making the most of private investor appetite for unquoted growth businesses.
“As SEIS starts to gain traction, there’s no reason why it shouldn’t do the same.”
Key facts on EIS and SEIS
