The success of the Enterprise Investment Scheme can be evidenced by the £2,305 million of funds raised under the scheme in the 2021/2022 tax year, increasing investor participation and the extension of the scheme beyond the pre-proposed cut-off. (1) The UK’s tax-advantaged schemes have undoubtedly helped in securing its position as one of the world’s leading Venture Capital markets and recently, many European countries are following in its footsteps. (2)
French policymakers have reportedly been looking to the UK as a leader in entrepreneurship and have proposed adopting two new schemes based on the EIS and SEIS programmes. Other European countries, including Ireland, have also implemented their own versions of tax-advantaged investment schemes. As the interest in investing in innovative startups grows and governments incentivize these investments, it is important to consider the impact on the UK EIS sector.
Currently, French citizens can utilize the Plan d'Epargne en Action, which encourages investment in European securities and offers tax exemptions for investments held for five years or longer. (3) The French startup ecosystem has received substantial government funding, with plans to stimulate an additional €1 billion annually in early-stage investment. (4) The proposed scheme would create three subcategories of startups - Jeunes Enterprises, Jeunes Enterprises d’Innovation et de Croissance and Jeunes Enterprises d’Innovation et de Rupture - each offering varying tax reliefs to investors with the purpose of attracting angel investors to France.
The proposed French investment scheme offers tax relief ranging from 18% to 50%. The French government aims to strike a balance, weary that attracting angel investors at an early stage can prevent startups from securing follow-on funding rounds. (5) In Ireland, investors benefit from a 40% income tax relief through the EIIS scheme. Please refer to our earlier blog which compares the Irish EIIS to the UK’s EIS called “Comparing EIS with EIIS”. However, the Irish SME market is not as extensive as the UK's, which may justify a need for varying levels of incentivization.
Despite the UK's continued dominance in attracting venture capital funding, with approximately £24 billion invested in UK startups compared to £11.8 billion in French startups in 2022, France has emerged as a noteworthy contender in the European venture capital landscape. (6) While leading markets like the UK and Germany witnessed a decline in tech funding last year, France experienced a remarkable 8% increase. (7) This upward trend solidifies France's position as a significant hub for venture capital, signalling its growing prominence in the European startup ecosystem. To sustain this trajectory, the inclusivity of the French investment scheme may become a crucial factor. It is worth noting that the UK's EIS extends its reach to include overseas companies with a permanent establishment in the UK, providing further opportunities for investment.
In summary, France's interest in tax-advantaged investment schemes reflects the success of the UK's EIS and SEIS programs. While France aims to enhance its venture capital market, the UK remains a dominant player. The evolution of these schemes in various countries highlights the importance of creating an attractive environment for investors and fostering innovation and entrepreneurship nationwide.
This blog was written with the assistance of OpenAI.
2. https://pitchbook.com/news/articles/2021-france-venture-capital-vs-germany-uk
3. https://www.hsbc.fr/en-fr/investissement/bourse-opcvm/produits/plan-epargne-actions/
4. https://sifted.eu/articles/france-uk-for-boosting-business-angels
5. https://sifted.eu/articles/france-uk-for-boosting-business-angels
7. https://sifted.eu/articles/london-paris-european-tech-leader
