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What our members have to say...
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"The speed pitch event was ideal for us. We were able to package our message into a 4 minute presentation and talk in more detail at our stand afterwards. We attracted many high quality potential investment contacts from the night and are now following up with these. A very well organised and excecuted night which I am very glad we did."
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Nick Boyd - AquaGen Technologies Pty Ltd |
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UK Government in ‘seed investment’ boost for business angels
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In a consultation launched on Wednesday, the Treasury set out plans for a new stand-alone scheme designed to encourage business angels – wealthy private individuals investing in small companies – to back the earliest stage companies, including those that haven’t begun trading, with ‘seed investments’.
The proposed ‘Business Angel Seed Investment Scheme’ (Basis), would be an investment vehicle with a similar tax treatment as the existing Enterprise Investment Scheme (EIS), which offers substantial income and capital gains tax relief to investors in small businesses.
Access would be restricted to a “narrower category of investor and a narrower range of company” than the current EIS but it could have added flexibility, such as the ability to use “debt instruments”, the consultation document said.
Basis might allow a transition to a conventional EIS structure if an initial seed investment period is successful.
The Treasury is also consulting on removing restrictions which prevent EIS investors taking preference shares – which business angels say can leave them disadvantaged in subsequent investment rounds when larger backers provide capital on a non-EIS basis – and on the size of investment and stake angels can secure through the scheme.
Bob Taylor, of angel investment network Envestors, broadly welcomed the consultation, but said the Basis proposal was unnecessary: “The market for investment is already well served by EIS and we are sceptical of another scheme focused purely on seed investments. Seed investments are the highest risk investments and as such, the rigours of market forces are a good natural shaking out process.”
He said he was supportive of the idea of lifting restrictions on qualifying shares and raising the investment limit. “The restriction to invest [only] in ordinary shares often forces a debate on valuation, which can lead to deals falling apart,” he said.
Peter Hawkes, chairman of Hotbed, a private investor syndicator, said proposals to simplify both EIS and Venture Capital Trusts (VCTs), another tax efficient investment scheme, “will mean a welcome reduction in red tape for both would-be investors and companies seeking capital”.
The consultation will also review the list of ‘excluded activities’ for the schemes, with the Treasury keen to ensure EIS and VCT investments are focused on risk taking businesses rather than being uses as tax shelters.
David Mott, from early stage investment firm Oxford Capital, said: “Narrowing the range of permitted investments would be good news as it would move to direct EIS reliefs towards real growth companies and away from schemes designed simply to offer shelters for those seeking to minimise their tax liabilities.”
David Gauke, exchequer secretary to the Treasury, said the consultation is "part of our plan to increase the competitiveness of the UK tax system, demonstrating that Britain is open for business".
In the last Budget, Chancellor George Osborne announced the rate of income tax relief available under EIS would rise from 20pc to 30pc, while the amount of investment per company in any one tax year that can attract upfront tax relief will double in 2012 from £500,000 to £1m, subject to EU state aid approval.
Mr Hawkes said those changes had already attracted increased interest in the schemes from potential investors.
The consultation will close on September 28.
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