Entrepreneurs outside London and the South East are shunning investment available under the Seed Enterprise Investment Scheme (SEIS).
Either they do not know about the incentives for startup investors or are simply seem to ignore them.
SEIS was introduced by the government in 2012 as a tax incentive to raise cash for startup companies considered too risky for borrowing by the banks.
The latest HM Revenue & Customs (HMRC) figures show more than 1,100 companies have raised £83.7 million from investors through the scheme.
However 57% of the companies and two-thirds of the investment cash raised have gone in and around London, writes Stuart Smith of SEIS.co.uk .
North/South gulf
“There are a number of reasons why the SEIS anomaly has arisen,” said Stuart.
“It’s recognised that London’s economy has run hotter than the rest of the country for some while and many of the startups in a SEIS are technology companies, which tend to cluster around hubs of similar companies in places like Cambridge and London’s Silicon Roundabout.”
Chancellor George Osborne obviously recognises this north/south divide and introduced measures to try to barrow the gulf in his Autumn Statement 2014.
These include infrastructure and investment plans for new roads and rail links between Manchester, Leeds, Birmingham and London.
Tax incentives
Investors sinking cash into a SEIS startup can benefit from a raft of generous tax incentives.
- On investment – investors receive a 50% income tax reduction regardless of their marginal rate on a SEIS investment of up to £100,000
- Capital gains – Assets sold to raise cash for a SEIS investment gain deferral relief, while the value of any equity stake grows tax-free
- Loss relief – Should a SEIS company fail, investors can claim loss relief against other income
SEIS is generally regarded as one of the best tax-incentivised schemes in the world for startup businesses.
| SEIS - Investment by region | ||
|---|---|---|
| Region | Number of startups | Investment (£m) |
| North East | 20 | 0.9 |
| North West | 80 | 5.3 |
| Yorkshire and Humber | 35 | 2.4 |
| East Midlands | 45 | 3.5 |
| West Midlands | 50 | 3.4 |
| South West | 85 | 5.7 |
| East of England | 95 | 7.0 |
| London | 440 | 36.8 |
| South East | 205 | 14.7 |
| Wales | 10 | 0.4 |
| Scotland | 45 | 2.9 |
| Northern Ireland | 10 | 0.5 |
| Total | 1120 | 83.5 |
| Source: HMRC | ||
