The Government published a report on Access to Finance this week, which gives a huge boost to SEIS, EIS and VCT schemes
The newly constituted Business Energy and Industrial Strategy Committee (formerly the Business, Innovation and Skills Committee) published its first report of the 2016-2017 session on 31 October. Its recent research had uncovered widespread praise for the three schemes and concludes: “It is important that the Government does not tinker with how the schemes operate”. It then goes on to say that the main barrier to use of the schemes appears to be low awareness among both businesses and investors.
The report states that Jimmy McLoughlin of the Institute of Directors said that only two out of three of his members had heard of the EIS and only one in three had heard of the SEIS! Exactly my experience when at an IOD reception wearing a badge reading “EIS Association” and being asked what the EIS meant. But the result at a House of Commons reception might have been even worse, as we are led to believe that less than a third of MPs know what the EIS is. The British Business Bank also comes in for praise but again, it suffers from very low awareness.
So what’s to be done? The report recommends that the Government directs resources towards promoting SEIS, EIS and VCT schemes. Precisely what we have been trying to achieve through the EIS Association over the years with extremely scant resources. We need to direct our fire at both businesses and investors. We are working up a new committee to help build up membership, with a particular focus on the financial advisory community, and taking the message out to the regions, as it is clear the new Government is focused on bringing the rest of the country into line with the South East. There is even a suggestion in the report that higher or further incentives might be made available to non-South East businesses.
As ever, the report emphasises the importance of evidence-based research proving that the schemes work. Which keeps reminding me of our leisure business (apologies for the repetition!) for which we recently provided £7m of EIS funding (over two years) which is now turning over £10m a year and making profits of £1.5m. So it pays corporation tax, it pays VAT and finally, it employs close to 200 people, all of whom pay income tax. A quick back of the envelope calculation would suggest the business generates taxes of around £3.5m a year, for a one-time investment of just £2.1m (30% x £7m)!
Martin Sherwood, Partner, Enterprise Investment Partners LLP
Martin Sherwood has many years’ experience of small company fundraising and in particular the tax-efficient investment market, specialising in the Hospitality & Leisure Sectors. Martin is currently chairman of the four British Country Inns companies and of Halcyon Hotels and Resorts plc, which is in joint venture with Luxury Family Hotels, which he helped launch 20 years ago. He was founder and head of Tax Efficient Solutions, first at Teather & Greenwood (1997-2004) and subsequently at Smith & Williamson (2004-2010), which he left to found Enterprise.
Martin has been closely involved in both Venture Capital Trusts and Enterprise Investment Schemes (EIS) since their inception, and is a founder director of the EIS Association, the official trade association of the EIS industry.
Martin works very closely with a wide range of Hospitality & Leisure entrepreneurs and has a significant network of investors and professional contacts as well as being a serial investor in his own right.