The government needs to do more to raise awareness of enterprise investment schemes by businesses, according to company directors.
The Institute of Directors (IoD) is calling on policy makers to revamp the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) because entrepreneurs and investors do not understand the benefits they offer.
In a report called Opening the Equity economy, the IoD argues the two schemes are under-used.
To back up the claim, the IoD released figures showing that 95% of the £1.6 billion pumped in to both SEIS and EIS in the 2013/14 tax year came from business angels investing more than £10,000 lump sums in 24,000 companies.
Around 70% of the investment was confined to start up or growing firms in London and the South East.
SEIS lite
The report polled IoD members about both schemes and found only 38% of directors had come across SEIS – and many ran companies that could benefit from the investment opportunities the scheme offers.
Now, the IoD wants the government to include SEIS and EIS investments in new ISAs to encourage more people to stake money into start ups and to take advantage of the tax reliefs they offer.
The institute also wants the government to spend more on promoting the schemes to businesses and investors and to introduce a ‘SIES lite’ online system for claiming tax relief of investments of less than £2,000.
An aggregator fund to spread the risk and give more companies the chance of raising funds was also suggested.
Report author Jimmy McLoughlin said: “Start ups are thriving and more people are stepping forward to give up their jobs in favour of becoming entrepreneurs.
Tax relief
“SEIS and EIS offer great investment and tax opportunities for businesses and investors. Promoting them more can open the economy to more investment that can only help economic growth and jobs.”
McLoughlin argues this will not happen while the schemes are under promoted and the procedure for claiming small amounts of tax relief is over complicated.
“We want more people with a few hundred pounds rather than a few with thousands to be more aware of investing and believe the government needs to do more to help this happen.”
