You may or may not be aware, but on the 23rd of September, the UK mini budget occurred. This budget revealed many positives for start-ups and early stages companies, as well as for investors.
Firstly, the most anticipated announcement occurred with the elimination of the sunset clause. “We want this country to be an entrepreneurial share owning democracy. The Enterprise Investment Scheme and Venture Capital Trusts, will extend beyond 2025.” - The Chancellor of Exchequer, Kwasi Kwarteng. In case you aren’t aware, if the sunset clause hadn’t been removed before the 6th of April 2025, then EIS and VCT would have ceased. This would have resulted in severe implications for companies fundraising, investors, individual industries and all UK regions levelling up campaigns.
Furthermore, the Chancellor also announced that “The Seed Enterprise Investment Scheme and Company Share Option Plans, we will increase the limits to make them more generous. Crucial steps on the road to making this a nation of entrepreneurs.” - The Chancellor of Exchequer, Kwasi Kwarteng. From the 6th of April 2023, companies will be able to raise up to £250,000 of SEIS investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from 2 to 3 years. To support these increases, the annual investor limit will be doubled to £200,000. It is estimated these changes will help over 2,000 companies a year that use the scheme to grow.
Now, why are these changes significant?
- Since the Enterprise Investment Scheme (EIS) was launched in 1994, over 32,965 companies have received investment, and around £24 billion of funds have been raised. The increase in the annual EIS investment limit for companies to £5 million from 2012 to 2013 attracted significant investment, and the amount of funds raised almost doubled in the tax years ending 2013 to 2015.
- Since the Seed Enterprise Investment Scheme (SEIS) was launched in 2012, over 13,800 companies have received investment, and around 1.4 billion of funds have been raised. The increase in the annual SEIS investment limit will undoubtedly have a similar result to the EIS increase, if not better, given the superior tax reliefs offered to SEIS investors.
It is without question that the mini budget brought about excellent news to the EIS industry, from investors to single companies. The UK Growth Plan 2022 clearly demonstrates the UK government’s determination to drive high growth by further unlocking private investment across the whole of the UK.