North East entrepreneurs are lagging behind their peers in other regions in taking advantage of tax efficient investment schemes designed to help expanding businesses maximise their growth potential.Analysis of the most recent Government figures has shown that the value of regional business investments made through the Enterprise Investment Scheme (EIS) has been increasing year-on-year, the actual number of investments being made in this way has been falling.
The HMRC statistics show that the total value of EIS investments rose from £13.7m in the 2011/12 tax year to £17.9m for the 2013/14 tax year, the most recent for which details are available, the number of investment dropped in the same period from 60 to 50.
The fall is in contrast to almost all other parts of the UK, with the North West seeing an increase from 150 investments to 170 in the same time period.
And Anthony Andreasen, corporate tax director at Gosforth-based RMT Accountants & Business Advisors, is encouraging North East entrepreneurs to ensure they fully consider all the options when deciding on the best way to attract capital into their companies.
The Enterprise Investment Scheme offers tax reliefs to investors in higher-risk small companies, and is intended to recognise the particular difficulties which very early stage companies face in attracting investment.
The parallel Seed Enterprise Investment Scheme was introduced in 2012 with a view to helping small, early-stage trading companies with up to 25 employees and assets of up to £200,000 raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies.
Across the UK as a whole, 2,710 companies raised a total of £1,457 million of funds under the EIS during the 2013-14 tax year, while almost 2,000 companies received investment worth a total of £164m through the Seed Enterprise Investment Scheme.
Anthony Andreasen says: “The EIS and SEIS were designed to greater financial flexibility to both investors and investees around how they shaped the deals that they put together, and it’s clear from the take up of both schemes that they’ve been successful.
“Our team is involved in an increasing number of EIS/SEIS transactions, and we know of several regional investments where access to the incentives offered by the schemes have been fundamental in ensuring they were completed, which makes the fall in the number of regional deals that have been done a little puzzling and concerning.
“The result of the EU referendum seems likely to sustain a substantial degree of economic uncertainty over the coming months, and while investors will still be looking to find homes for their capital, they seem certain to be examining all the reasons why they should make a particular investment harder than ever.
“Management teams who’re looking to bring new money into their businesses have to make the absolute best they can of every opportunity that’s presented to them, such as those that come through the EIS and SEIS, because they can be sure their competitors, both inside and outside the region, will be doing just that.”