Record £1.4bn investment in Enterprise Investment Schemes
Data from HMRC shows that the total amount invested in EIS investments has also hit a new record high of £1.4bn in 2013-14, while Radius calculates that the average amount raised per company reached £535,615 up from £423,016 in 2012-13.
Radius says the increase is in part due to the difficulty SMEs have had in accessing bank lending since the recession, but points out that EIS is also increasingly popular amongst investors because of its tax breaks.
The firm calculates secondary fundraising now makes up half (49%) of the money invested through the EIS in 2013-14, up from 44% in 2012-13, and 33% in 2011-12.
Radius says that 1,375 companies used EIS to raise secondary funds in 2013-14, up from 1,265 in 2012-13, and 1,110 in 2011-12.
The total amount of money companies raised in secondary fundraising through EIS schemes also increased to £677.3m in 2013-14, up 49% from £454m in 2012-13, and 98% from £341.6m in 2011-12.
Gary Robins, director at Radius Equity, said that EIS is helping SMEs to return to their role as a job-creating engine.
‘The increase in secondary Latest Investments is good news as it shows that the EIS market can provide the capital needed by businesses as they look to enter their “roll out” stage – turning local or regional businesses into national businesses,’ said Robins.
Earlier this week a report from the Public Accounts Committee (PAC) looking at the effectiveness of tax reliefs accused HMRC and the Treasury of ‘a worrying lack of curiosity about the cost of tax reliefs’.
In particular, PAC suggested that the complexity of the tax system and the number of reliefs available made it harder to identify instances where a relief is being exploited for a purpose parliament did not intend.
In its report the committee cited the example of the costs of R&D tax relief, which increased from around £100m in 2001 to over £1bn in 2011-12 whilst the actual amount of business expenditure on R&D stayed more or less the same.