New generation of business angels help Enterprise Investment Scheme deals break £1bn barrier
2012 reforms to tax relief scheme for private investors helped to pull in greater number of smaller investments from “moderately well-off individuals”
Changes to thresholds for companies raising finance via the Enterprise Investment Scheme (EIS) have lured a new generation of angel investors while helping to boost total investments to over £1bn, a report published by Chancery Investment Partners (CIP) found.
The EIS scheme – a series of tax reliefs offered to angel investors – was reformed in 2012 to enable people to back larger businesses with the limit an individual can invest in an EIS company lifted from £500,000 to £1m.
Investors can claim 30% of the investment cost against their tax bill and not pay Capital Gains Tax on investments held for up to three years
Turnover and employee numbers for companies using the scheme were also increased, with the revenue figure rising from £7m to £15m and staff limits raised from 50 to 250.
This, said CIP, has resulted in an increase in investments of less than £50,000, which the corporate finance house puts down to a rise in the “mass affluent” – “moderately well-off individuals” utilising the scheme.
“EIS was already growing in appeal to the mass affluent before these changes were made,” said Gary Robins, partner at Chancery Investment Partners. “The fact that investors can now put their money into larger, more established businesses has made EIS even more attractive to this audience.”
“A wider group of well-off investors who are looking for greater income or capital growth from their savings are realising that EIS is no longer just for ultra-high net worth individuals,” added Robins.
CIP’s findings show that since 2012, 36% of EIS investments were of less than £50,000 – an increase from 29% two years earlier.
Total investments via the scheme rose from £545m in 2010-11 tax year to £1.01bn in 2011-12.