Improvements to EIS miss the mark

Changes to the Enterprise Investment Scheme (EIS) unveiled in chancellor George Osborne’s 2011 Budget and aimed at boosting funding for small and medium-sized enterprises (SMEs) may miss the mark, accountancy firm Shelley Stock Hutter has told Financial Director.

As part of the Budget, Osborne unveiled several changes to the EIS, which is designed to help smaller, higher-risk trading companies raise finance, to encourage efforts to build an enterprise culture.

The changes include raising investors’ income tax relief to 30 percent from 20 percent of what they invest, increasing to £10m the amount that companies can raise, increasing the qualifying company limits for EIS to 250 employees and gross assets of £15m, and doubling the EIS limit for investors to £1m.

Lynton Stock, founding partner of Shelley Stock Hutter, said the changes will allow investors to put money into less risky companies but questioned how much difference they will make.

“I cannot say I am jumping up and down over the changes. I am not convinced they will make a big difference, although they will make a small difference,” Stock told Financial Director. “I do not know many people who have made significant amounts of money from the scheme. Whether people will invest the full £1m remains to be seen.”

Bobby Lane, head of Denver Chase International, the outsourcing operation of Shelley Stock Hutter, added that the changes do not address the issues facing SMEs at the moment.

“The issues facing SMEs and growing businesses at the moment are the ability to raise finance, the cost of employment and the cost of starting up. The increase in EIS relief is not wise enough or broad enough to address those immediate issues,” he said.