On 5 May 2022 the UK government published statistics for the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR). These latest statistics show the amount of funds raised by companies using these tax advantaged incentive schemes in the tax year 2020/21.

By collecting the relevant statistics, the UK government can monitor the use of tax incentives and better assess the effectiveness of the incentives. Although it is difficult to measure the extent to which the incentives increase the amount of investment in early stage companies, the statistics may allow the government to identify issues arising and design adjustments to improve the targeting of the incentives.

Enterprise Investment Scheme (EIS)

The EIS provides investors with an incentive to invest in the shares of small, unquoted companies. Tax relief is available to the investor based on a percentage of the amount invested. Relief from capital gains tax may also be available.

In the year 2020/21, 3,755 companies participated in the EIS scheme and raised a total of GBP 1,658 million. In that year there were 1,370 companies raising funds under the EIS scheme for the first time, and they raised a total of GBP 358 million in investment. Of the total funds raised under the EIS in 2020/21, GBP 571 million representing 34% of the total was raised by companies in the information and communication sector.

The report notes that owing to the impact of the Covid-19 pandemic, EIS investment was down in the first three quarters of 2020/21 compared to the same period in the previous year. In the final quarter EIS investment rose to a level above the level in the final quarter of the previous year.

Seed Enterprise Investment Scheme (SEIS)

The SEIS was launched in 2012 to help early-stage companies raise seed capital. Enterprises at an early stage of their business operations often have difficulty in raising investments owing to the perceived investment risks, and the scheme offers tax relief to investors in early-stage companies that fulfil certain conditions. Investors under the SEIS can obtain 50% income tax relief based on the amount of their investment and capital gains tax relief is also available.

In the year 2020/21 the report notes that 2,065 companies participated in the SEIS scheme, raising a total of GBP 175 million. Of the participating companies in 2020/21, around 1,660 were raising funds under the SEIS scheme for the first time, raising a total of GBP 154 million in investment. Companies operating in the information and communication sector accounted for GBP 72 million of funds raised which was 41% of SEIS investment in the year.

Social Investment Tax Relief (SITR)

SITR can be used by certain social enterprises to raise funds to support their trading activity. Funds can be raised under the scheme by a community interest company, community benefit society or charity. Investors may obtain tax relief on shares purchased or on funds lent to these types of social enterprise. In the year 2020/21, 35 social enterprises received investment through the SITR scheme, and GBP 3.7 million was raised.

Requests for Advance Assurance

To increase certainty for investors, companies that intend to use the EIS, SEIS or SITR can apply for advance assurance from HMRC that the shares to be issued will fulfil the requirements of the relevant scheme.

In 2021/22 a total of 3.455 advance assurance requests (AARs) for EIS relief have been received and 2,510 have been approved so far. For the SEIS a total of 2,750 AAR applications have been received and 1,970 have so far been approved. For SITR a total of 40 AAR applications were received and 20 have been approved to date.