Seed Enterprise Investment Scheme investment limits are too low and should be raised to at least £250,000 to help new companies thrive, claims an investment specialist.
Currently, investors can input £100,000 into SEIS in a tax year and a maximum £150,000 over three tax years, but this is not enough in some cases, says investment expert Mark Payton, of venture capital firm Mercia Fund Management.
Payton was reported as saying on web site seis.co.uk that with 1,250 companies already benefitting from SEIS investment since April 2012, the time has come to look at cash limits imposed on businesses to encourage more investors to come forward and aid companies to accelerate growth.
He reckons that SEIS undoubtedly helps many start-ups, but the cash ceiling means some firms do not perform as well as they could.
“Early-stage businesses face fundamental problems due to the lack of follow-on capital,” he said on seis.co.uk.
£250,000 challenge
“While SEIS is a welcome tool for entrepreneurs that paves the way for business growth, more is needed if Chancellor George Osborne is serious about backing British businesses.”
As a result, Payton is challenging Osborne to lift SEIS investment caps to £250,000 per company.
“This higher investment will give new businesses the capital required to speed up growth, increase export potential and to make more jobs,” he said.
Payton’s Mercia is a heavy SEIS investor and feels experience with the tax breaks has shown money is not the only investment SEIS companies need.
“We work with a number of universities with spin-out projects that are some of the most innovative businesses in the country. However, the people behind these companies are scientists not business people and need seasoned business advisers to help them through the first stages of setting up a SEIS company.”
Hybrid funding
Payton warns companies constricted by SEIS finance limits are turning to crowdfunding.
“This may deliver more cash but is unlikely to offer anywhere near the level of business support a new start company needs to thrive,” he said.
“Maybe a hybrid SEIS and Enterprise Investment Scheme (EIS) would be the halfway house that offers the right solutions for these new businesses.
“This way start-up funding and follow-up investment to consolidate and grow would be addressed.”
SEIS offers income tax and capital gains tax breaks to private investors putting money into qualifying new start businesses.
