Enterprise investment scheme investments fall

Enterprise investment scheme (EIS) companies raised almost £200m less in 2019-20 due to stricter rules on venture capital investing.

The latest statistics from HMRC show that in 2018-19 £1.8bn was invested into 3 905 companies down from £2bn the previous year. Investment using the seed investment enterprise scheme (SEIS) has also fallen. In 2018-19 1 985 companies raised a total of £163m of funds a decrease from 2017-18 when 2 430 companies raised £195m.

According to Price Bailey the ‘risk to capital’ rules introduced on 1 December 2017 mean that entrepreneurs must demonstrate to HMRC that there is a ‘significant risk’ of a capital loss on their shares exceeding the ‘net investment return’. This is leading to nearly one in ten applications for EIS being rejected or withdrawn.

Chand Chudasama partner at Price Bailey said: ‘The new...