The Venture Capital Market
The latest statistics relating to the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR) scheme have been published.
HMRC’s publication* details the number of companies receiving investment through the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, and the Social Investment Tax Relief scheme, along with the amount of funds raised.
This release includes first estimates on funds raised for tax year 2020/21. The publication also provides the industrial and geographical breakdown of EIS and SEIS companies, the distribution of companies by the amount of funds raised, and the distribution of investors by the size of their investment.
The key headlines include:
Enterprise Investment Schemes
- In 2020/21, 3,755 companies raised a total of £1,658 million of funds under the EIS scheme. Funding has decreased by 12% from 2019/20, when 4,165 companies raised £1,890 million.
- As the COVID-19 pandemic impacted the UK economy, EIS investment across the first three quarters of 2020/21 remained below the level seen across the same quarters of 2019/20. However, in the last quarter of 2020/21 EIS investment rebounded above the last quarter of 2019/20.
- Around £358 million of investment was raised by 1,370 new EIS companies in 2020/21.
- In 2020/21, companies from the Information and Communication sector accounted for £571 million of investment (34% of all EIS investment).
- Companies registered in London and the South East accounted for the largest proportion of investment, raising £1,078 million (65% of all EIS investment) in 2020/21.
- The number of investors claiming income tax relief on self-assessment forms under the EIS has increased, from 36,150 in tax year 2019/20 to 37,535 in 2020/21.
- The total tax relief claimed under EIS slightly decreased overall in 2020/21, but there was a slight increase in the total number of investors (4%), particularly in the smaller investment size categories (up to £75,000).
In 2018/19, new limits were introduced for EIS investments. Investors can invest up to £2 million, if at least £1 million of this is invested in knowledge intensive companies (KICs). There were 40 investments of between £1 million and £2 million in 2020/21, contributing £58 million of investment. With the higher limit available, investments of over £500,000 comprised 16% of the total amount of EIS investment raised on which claims were made in 2020/21.
Companies that qualify as knowledge intensive (KI) at the time of share issue can make use of increased annual and lifetime funding limits, £10 million and £20 million respectively, and these KICs can receive their first EIS or other risk finance investment up to ten years from first commercial sale, as opposed to the normal limit of seven years.
Seed Enterprise Investment Schemes
- In 2020/21, 2,065 companies raised a total of £175 million of funds under the SEIS scheme. Funding has slightly increased by 4% from 2019/20 when 2,070 companies raised £169 million.
- Around 1,660 of the companies were raising funds under the SEIS scheme for the first time in 2020/21, representing £154 million of investment.
- In 2020/21, companies from the Information and Communication sector accounted for £72 million (41% of all SEIS investment).
- Companies registered in London and the South East accounted for the largest proportion of investment, raising £120 million (68% of SEIS investment) in 2020/21.
- In 2020/21, 9,195 investors claimed income tax relief on self-assessment forms for the SEIS, compared to 8,545 investors in 2019/20. The amount of relief claimed also slightly increased by 6% in line with the increase in funds raised by companies in 2020/21.
- Most investors claiming the relief invested £10,000 or less into qualifying SEIS companies (59%).
- Investments of over £25,000 contributed 59% of the total amount of SEIS investment raised on which claims were made, which is slightly lower than 2019/20 (63%).
Social Investment Tax Relief
In 2020/21, 35 social enterprises received investment through the SITR scheme, and £3.7 million of funds were raised. Funding has slightly increased from 2019/20, when 35 enterprises raised £3 million.
EISs and other alternative investing opportunities are only suitable for people who are experienced investors and have the capacity to absorb losses without their standard of living being significantly affected. Because of this, is it vital for investors to work with planning firms that have expertise and robust processes around alternative investments.
The Financial Conduct Authority (FCA), has strict rules in place which must be followed and we have processes in place to adhere to the rules where we provide this service to our clients.
Please note: Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns. Investment performance can go down as well as up. Investing in these types of businesses is not suitable for everyone due to the increased potential for you to lose your capital.