EIS, SEIS and VCTs – Investing in Enterprise
For over twenty years, Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) have supported the growth engine of the British economy: smaller companies.
They are also one of the few areas of investment where government willingly offers generous tax reliefs, both on the initial investment and on the proceeds of qualifying investments.
Seed Enterprise Investment Schemes (SEIS) were launched in April 2012 to further this initiative by specifically providing start ups with an opportunity to raise funds.EISSince the EIS was launched in 1993, £20 billion has been invested in 29,770 companies. £1.929 billion was raised for 3,920 companies in 2017/18. Investment into the EIS market has steadily increased since 2010 despite several changes to the eligibility criteria for the underlying companies, 39% of funds raised through EIS in 2017/18 was by companies using the schemes for the first time which is estimated to be worth £833 million. In 2017/18, 2,320 companies received £189 million of funding from Seed EIS, which offers initial tax reliefs of up to 64%. Over 1,700 of the companies were using SEIS for the first time, raising £159 million with an average of £81,000 per company, once again demonstrating that along with EIS there has been a consistent increase in demand within the marketplace.VCTs
VCTs were introduced in 1995 and have raised more than £7.7 billion of funds. In 2018/19 VCTs issued shares of £716 million, a 31.4% increase from 2016/17. There are currently 62 VCT funds with 42 of these raising new funds in 2018/19 down from 43 in 2016/17. There were 18,890 VCT investors who claimed Income Tax relief in 2017 to 2018, an increase of 24% from 2016 to 2017.
Venture capital trusts in 90 secondsWhat are the benefits of investing?
In an environment where more and more people are finding access to pensions restricted by the lifetime and tapered annual allowances, VCTs offer an excellent alternative, whilst EIS provide a generous cocktail of tax reliefs. However, with so many companies and funds to choose from, many of which are exceptionally high risk, at Mattioli Woods we take great care to recommend EIS, SEIS and VCTs that are appropriate to the needs of our clients.
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