Our Tax Expert Group contributed to our response to HM Treasury's consultation on Enterprise Investment Scheme knowledge-intensive funds.
We noted that younger knowledge-intensive companies can face obstacles obtaining the levels of patient capital that they require due to having insufficient years of trading history, have not received seed capital or hired technical staff. This can make it more difficult for them to approach potential new investors.
We recommended increasing the limits for SEIS from the current £150,000 per company to £250,000 per company to improve the flow of patient capital to knowledge-intensive companies.
We encouraged the government to facilitate a greater number of varied funds available to investors which hold EIS and SEIS shares to enable investors to spread their risk.
From the options outlined in the consultation regarding attracting investors to knowledge-intensive funds, we stated that up-front tax relief would be the most effective tool as it would encourage serial investment. However, we did note that the disadvantage of this option would be that if funds are invested at the two year limit and the three year qualifying period is added to this, investors must wait five years from the date of investment until they can be certain that the EIS relief received is still valid. We encouraged the government to provide further information as to the effect on investors if individual EIS investments within the fund failed, no longer qualified for EIS, or were sold within the qualifying period.