EIS – enterprise investment scheme – Lord Howard Flight

All businesses need an injection of cash in order to grow, whether it’s from external third parties or from internally generated profits or both. Figures still show that Britain is 17% lower on productivity compared with the rest of the G7 countries and a lack of investment into business particularly SME investment, is still one of the biggest factors to blame.

04 March 2015

Show No.1 – The Enterprise Investment Scheme

Currently the government is giving very generous tax incentives to investors to encourage them to support businesses. With the amount of business angels on the rise and popular TV programmes like Dragon Den making business investment “sexy”. Isn’t it time to take a look at some of the mechanisms supporting this important arm of business growth? With 30 to 50% of your investment wiped off your capital gains tax; there is no wonder Peter Jones and Deborah Meaden have stayed in the Den for so long. We spoke to Lord Flight Chairman of the EISA (Enterprise Investment Scheme Association) and architect of EIS about this scheme which encourages private money into business.

Video Interview Map

0:10 – seconds   Show Introduction

0:33 – Introduction to Lord Flight, member of The House of Lords & Chairman of the EIS Association

01:09 – What is the Enterprise Investment Scheme and what is the Seed Enterprise Investment Scheme?

04:46 – Can you explain the tax relief benefits to investors in businesses for both of these schemes?

09:41 – Under the rules who are allowed to invest under the SEIS and EIS schemes and what companies qualify to receive investment?

12:20 – Once an investors invests under either of the schemes how should the shares be issued to qualify for the tax relief?

15:37 – “Sweat equity”, mentorship, time and expertise can be given to a company in exchange for an equity stake of a company. Why can’t this be seen as investment? Why are only cash investments allowed?

17:06 – Do all types of shares (ordinary, preferential etc), qualify for EIS & SEIS? (Lord Flight also gives a hint on a possible rule change for individuals lending money to a company in relation to the scheme).

18:19 – If I have a friend who owns a business and I own a business can my friend invest in my business and I in their business and still get the tax relief benefits?

18:45 – You mentioned that there are two ways to invest (A) by cash and (B) through a fund can you elaborate on the method of investing through a fund and what are they and how do we find them?

23:49 – There is a rule which exempts investors from benefiting from the schemes called “connection with a company” Can you explain what this is?

25:03 – What about Business Angels?

26:08 – The £5M per annual cap for some industry sector companies is too low, companies need flexibility (Lord Flight comments).

28:04 – Are there restrictions on what the invested money can be spent on?

29:48 – “One part of the regulation I find puzzling is this two year restriction that the company should not be trading for more than 2 years…”

Lord Flight “ I’m not quite sure what you are talking about actually…

32:54 – Is a company allowed to raise funds under both schemes?

36:24 – If an investor has already made an investment into a non EIS status company and now wants to be a part of the scheme what advise can you give?

37:51 – The Small Company Enterprise Centre is the arm of the government responsible decision making under the scheme, how easy are they to engage with and do they offer advisory services?

40:26 – Is there an arbitrator in case things go wrong?

41:13 – Is EIS being used aggressively to attract foreign investment?

42:49 – How has the scheme being doing so far and where do you see the growth sector of the scheme?

44:48 – How does the schemes we have here in the UK compare with similar schemes in Europe?

46:12 – How much money did the schemes raise for businesses last year?

46:37 – What changes would you recommend be made to both schemes going forward into the future?

47:47 – Do you believe these schemes are working well enough to keep the support of this government and supportive governments; with an election coming up?

49:23 – Closing comment from Lord Flight.

50:53 – END