Venture Capitalising the United Kingdom: The purpose of the Enterprise Investment Scheme

On the 18th of October, the Financial Conduct Authority (FCA) announced that an estimated 4.1 million people are in financial difficulty. The statistics were calculated by consumers owing to missed domestic or credit bills, displaying that primarily consumers between 25 and 34 are in deeper financial difficulties. With real wages falling, the amount of debt we are taking on is rising and the pressure we are under is increasing – preventing young investors and entrepreneurs from flourishing.

The dangers of a slowly growing young economy can become a problem later on, particularly for countries such as the UK where the rising political tensions surrounding Brexit are threatening to slow down economic growth. The Brexit divorce bill, although in the process of being negotiated could escalate to €60bn. Businesses are currently feeling in a dead-lock as to the future of their dealings and although there are wide attempts to maintain its membership benefits in exchange for the exit fee. One type of economic stimulation is to invest into the growth of younger companies; start-ups.

Venture capital schemes have been placed by the UK government to incentivise investments into start-ups. The Enterprise Investment Scheme (“EIS”) offers a pathway for investors seeking to make a larger income by connecting their investment opportunities into companies under 10 years old, with less than £15 million of assets. The EIS forms part of the 4 venture capital schemes established by the government. EIS specifically is designed to allow young businesses to grow, allowing to attract up to £5 million a year and a maximum of £12 million in the company’s lifetime.

Investors are offered tax reliefs in exchange of shares purchased in the new company. The shares are full risk ordinary shares which (1) are not redeemable and (2) carry no special rights to the investors assets or preferential rights to dividends (see further information on gov.uk). The scheme is primarily structured for active investors who are looking to generate a larger net income by reducing their costs.

The importance which the government has placed in raising funds for new companies can be witnessed by the cautious attitude that HM Revenue and Customs has displayed. The government body has been very cautious as to the industries and companies which they provide EIS relief to. Most recently, the film and TV industry has been affected following an HM Treasury Review as investments did not meet the risk criteria.

EIS investments are high-risk, so certainly aren’t for everyone. However, the generous tax perks could offset some of these problems, especially if you are a higher rate taxpayer. It is also key to research the companies who offer these investments: holding shares in a booming company whilst receiving tax benefits could either be a lucky break or a smart investment.

For further information about the current EIS projects promoted by Amio Wealth Limited, contact us on info@amiowealth.com or directly on 0203 307 1250.

Amio Wealth Limited © Elizabeth Frumson