Many more start-up firms should qualify for the Enterprise Investment Scheme (EIS), an HMRC-administered initiative that offers tax relief on investment into early-stage businesses.
To encourage more investment which would kick start the economy, according to an award-winning independent financial adviser.
deVere United Kingdom’s Head of East Midlands, Mitch Hopkinson, a Financial Times publication’s ‘UK Independent Financial Adviser of the Year,’ comments: “Entrepreneurs and small businesses are the life-blood of our economy, and the EIS has proven to be a successful way for certain start-ups to attract investment when they might have found it difficult to do so through more traditional means.
“Of course, this is positive news as thriving new enterprise is fundamental to the UK’s sustainable economic growth. However, the criteria to qualify as an EIS company is narrow and complex, meaning that the potential wider economic benefits are significantly muted.
“As such, HMRC should consider widening the scope of this scheme in order to encourage greater levels of investment in small, young businesses because their growth and success could play a crucially important role in helping to kick-start Britain’s economy.”
He adds: “Start-ups across the UK are crying out for investment and many experienced investors are looking for such investment opportunities due to the generous and far-reaching tax benefits EIS offers them – but matching the right investor with the right start-up can be challenging due to the stringent qualification rules for both the small businesses and the would-be investors.”
One firm that has been able to successfully navigate the EIS is Coxpowertrain, a West Sussex-based diesel engine manufacturer and developer that uses best engineering practice with patented technologies to unlock new levels of performance for marine and land vehicles and aircraft.
Coxpowertrain’s chief executive, John Allen, says: “The bulk of our investment came from the EIS route. It has been vital to our continued growth because many other investment avenues, including corporate investment, has practically dried up for early-stage companies like us.
“However, by working with the deVere Group’s Mitch Hopkinson we were able to access his network of high-net-worth clients who were actively seeking to invest in UK innovation in order to benefit from the series of tax reliefs that they would be eligible for as a result of supporting the firm.”
Mitch Hopkinson concludes: “The flagship Enterprise Investment Scheme has helped my corporate clients secure much-needed capital and my high-net-worth clients reduce their tax burden.
“As these start-ups grow, and as investors have more funds to invest elsewhere, the UK’s economic recovery should be strengthened. Therefore, it’s crucial to widen the scope of the EIS and unleash its full potential.”