The Government has revealed plans to reform the structure of enterprise investment scheme funds from 2020.
- A requirement that at least 80% of funds raised must be invested in knowledge-intensive companies
- The time period over which approved funds must make their investments will be extended from one year to two. Funds will be required to invest at least 50% of each raise within the first 12 months, and to keep that money not yet invested in cash
- A carry-back rule will be introduced so that investors will be able to set their relief against income tax liabilities in the year before the fund closes
- Approved funds will be required to submit annual statements to HMRC to demonstrate that they continue to meet the relevant conditions
With such a high emphasis on knowledge-intensive businesses, how is the Government supporting local family-run businesses that fall outside of the research and development remit?
Capital Step’s Co-founder and Partner, Rael Sarembock, responds:
“The new EIS fund will be a huge boost for IP rich businesses, it is also good to see that the Government is gearing investment structure such as EIS to be reflective of the current state of the private sector – one where knowledge-intensive underpins a significant proportion of UK businesses. With Brexit only five months away, ensuring that our private sector is as globally resilient as possible has been a key priority especially given the political and economic uncertainty experienced thus far, the additional finance will be vital for businesses to continue to spend on innovation, research and development.
However, what we must ensure is that traditional sectors – including those in the regions and that are family run – are supported just as well, it is still increasingly difficult for businesses to acquire growth finance from traditional lenders and with thousands of disenfranchised entrepreneurs feeling let down by the alternative finance arena’s prioritisation of new age sectors, changes need to be made across the board to help what is the lifeblood of our economy. Capital Step offers this change to entrepreneurs all without giving up any shares and ownership of their business, which they have poured blood, sweat and tears into.”