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I have recently joined Sapphire Capital Partners as a placement student, and one of the first
things I was asked to do was complete the Enterprise Investment Scheme and Seed
Enterprise Investment Scheme accreditation run by Intelligent Partnership. I had heard both
schemes mentioned in lectures, as a single slide stating that they were simply government
tax reliefs. Working through the EIS/SEIS course, it was obvious that the slide had been
doing a lot of heavy lifting.
Why are these schemes important?
On the surface, EIS and SEIS exist because early-stage companies are hard to fund.
They're too risky for bank lending and often too small for institutional venture capital, so the
government offers tax reliefs to private investors willing to take that risk.
Beyond the surface there is much more to understand. Information such as whether a
company qualifies, whether it stays qualifying, how a fund is structured, what investors are
told and when all of it is governed by detailed rules, getting any part of it wrong has
consequences for real people's money.
Three things that changed how I think about the UK Enterprise Investment Scheme
One of the biggest shifts for me was that the reliefs aren't guaranteed at the point of
investment. I had assumed tax relief was something an investor secured when they put
money in and then stopped thinking about. However this is not the case; relief can be
withdrawn if things change afterwards, e.g, if the company stops meeting the qualifying
conditions, or if the investor doesn't hold the shares for the minimum period. The investment
and the relief stay linked for years after the money moves.
Advance assurance isn't a certificate of safety. Based on the information provided, HMRC
advance assurance tells a company that they would expect the shares to qualify. It's an
important step, but it isn't a guarantee, and it says nothing about whether the business will
actually succeed. Those are two separate questions, and I would have been quietly
collapsing them into one.
The module on risk was the one that stuck with me. Losing your money is the obvious one, but it sits alongside illiquidity. There's usually no market to sell these shares into, so an investor may be committed for years
whether they like it or not. The tax risk is also very important. If a company makes changes that no longer meet the qualifying criteria during the period, they could lose tax relief. The lack of control from investors is one that really surprised me. Buying shares in an early-stage company isn't like buying shares in a listed one, there's no say in day-to-day decisions, and outcomes depend entirely on a management team the investor doesn't control. It's easy to
read a list like that quickly. Slowing down on it made me realise how much of the work I'll be looking at over the coming months exists specifically to manage those risks.
I've only just started at Sapphire, so I can't claim I've seen all of this play out yet. However
completing the accreditation in my first weeks did give me a map before I needed to use it.
The effect has already been noticeable in small ways. Terms that would have gone past me
in conversation now mean something specific. When advance assurance comes up, I know
what's being applied for and why it matters. When someone refers to a company's qualifying
status, I understand it's an ongoing condition rather than a one-off test. I'm still very much at
the stage of listening more than contributing, but I'm listening with some idea of what I'm
hearing.
What I'm curious about now is the gap between the two. The course teaches the rules
cleanly, in the order that makes them easiest to learn. Real companies and real funds
presumably don't arrive in that order, and I suspect a lot of the skill in this job lies in the
judgement calls the syllabus can't cover. That's what I'm looking forward to seeing over the
rest of the placement.
Where this goes next
For the rest of my time at Sapphire, the accreditation means I can follow conversations I
would have previously had to nod through, and ask sharper questions when I can't. When I
go back to UU for my final year, I'll be looking at both sides of my degree differently; The
accounting modules with a much clearer sense of how tax relief actually works in practice
rather than as a set of rules on a page, and the law modules with a better feel for how a
regulatory framework like this gets built and applied day to day. Studying accounting and law
together suddenly makes a lot more sense when you've seen a scheme that sits right at the
junction of both.
