The “narrow and complex” criteria firms must meet to qualify for enterprise investment schemes are stifling entrepreneurship and holding back the economy, says deVere’s Mitch Hopkinson.
The HMRC-administered initiative, which offers tax relief on investment into early-stage businesses, should encourage more investment to help kick start the economy, asserts head of East Midlands Hopkinson.
He says: “Entrepreneurs and small businesses are the life-blood of our economy and the EIS has proven to be a successful way for certain start-ups to attract investment when they might have found it difficult to do so through more traditional means.
“However, the criteria to qualify as an EIS company is narrow and complex, meaning that the potential wider economic benefits are significantly muted.”
Hopkins believes HMRC should consider widening the scope of this scheme in order to encourage greater levels of investment in small, young businesses, which he urges could play a crucially important role in helping to kick-start Britain’s economy.
”Start-ups across the UK are crying out for investment and many experienced investors are looking for such investment opportunities due to the generous and far-reaching tax benefits EIS offers them but matching the right investor with the right start-up can be challenging due to the stringent qualification rules for both the small businesses and the would-be investors,” he says
Hopkins cites one firm, Coxpowertrain, a West Sussex-based diesel engine manufacturer and developer, which has benefitted widely from EIS investment.
Coxpowertrain chief executive John Allen says: “The bulk of our investment came from the EIS route. It has been vital to our continued growth because many other investment avenues, including corporate investment, has practically dried up for early-stage companies like us.”
Hopkins adds: “As these start-ups grow, and as investors have more funds to invest elsewhere, the UK’s economic recovery should be strengthened. Therefore, it is crucial to widen the scope of the EIS and unleash its full potential.”