Budget 2017: Government told to show restraint on EIS tax relief for startup investment in Patient Capital Review
The government has been warned not to crack down on tax breaks for investors betting on early stage companies amid a major review into funding.
The Enterprise Investment Scheme (EIS) faces an uncertain future as the Treasury is reportedly considering clamping down on the tax-relief scheme which is designed to encourage investment in startups.
Read more: Patient Capital? Time for a national database
But a group of leading supporters which includes several lords, has hit back at criticisms that the scheme is being exploited warning that curtailing EIS would stop the UK from creating world-beating innovative companies.
“Britain’s failure to give sufficient funding support to growing businesses means many fall prey to opportunistic foreign corporations or find their promise unfulfilled,” they wrote in a letter first published in the Sunday Times.
“The government’s Patient Capital Review is a welcome attempt to address the problem. We are, however, deeply concerned that as a result of the review extensive new restrictions are being considered to the Enterprise Investment (EIS) Scheme structure. EIS has proved vital to many of those the Prime Minister celebrated in her recent conference speech – “the wealth creators, risk takers, innovators and entrepreneurs… who generate jobs and prosperity for our country”.
Some £16bn has been invested in 26,000 companies since the scheme was first launched in 1994. A further £178m was invested in a similar scheme for even earlier stage companies last year.
Read more: UK fintech startups are on track for a record-breaking year of investment
The results of the review and any changes are expected to be announced in next month’s Budget.
The 12 leaders to sign the letter warning on EIS
Lord Howard Flight
Lord Michael Grade
Lord Peter Hain
Lord David Blunkett
Mark Brownridge, director general of enterprise investment scheme Association
Emma Jones MBE (for services to Enterprise), founder of Enterprise Nation and SME representative for Crown Commercial Service
Anne Glover CBE, chief executive of Amadeus Capital
Dr. Mike Bandar MBE, serial entrepreneur and angel investor
Keith Lassman, partner at Howard Kennedy
Roger Blears, senior partner at RW Blears LLP
John Glencross, chief executive, Calculus Capital
Gillian Roche-Saunders, partner, Bates Wells Braithwaite