On 17 May 2023 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 2021/22. The statistics indicate that investment in new companies under these schemes has rebounded following the pandemic.

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. A number of modifications have been made to the schemes since they were first introduced, based on analysis of the outcomes.

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 2021/22, the statistics show that 4,480 companies participated in the EIS scheme and raised a total of GBP 2,305 million. This included 1,755 companies raising funds under the EIS scheme for the first time, and they raised a total of GBP 584 million in investment. Of the total funds raised under the EIS in 2021/22, GBP 785 million representing 34% of the total was raised by companies in the information and communication sector.

There was a further drop in the proportion of funding obtained by companies that raised funds for the first time under the EIS. This was probably due to the new risk–to–capital condition introduced in 2018. The risk-to-capital condition aimed to remove investment arrangements based on capital preservation and to focus the scheme on investment in early–stage companies that intend to grow in the longer term.

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 2021/22 the report notes that 2,270 companies participated in the SEIS scheme, raising a total of GBP 205 million. Of the participating companies in 2021/22, around 1,815 were raising funds under the SEIS scheme for the first time, raising a total of GBP 179 million in investment. Companies operating in the information and communication sector accounted for GBP 83 million of funds raised, which was 40% 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 2021/22, 40 social enterprises received investment through the SITR scheme, and GBP 5.4 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. These statistics relate to the year 2022/23.

In 2022/23 a total of 3.650 advance assurance requests (AARs) for EIS relief were received and 2,945 have been approved so far. For the SEIS a total of 2,825 AAR applications have been received and 2,315 have so far been approved. For SITR a total of 25 AAR applications were received and 15 have been approved to date.