Enterprise Investment Scheme (EIS) investments are sought by investors around the end of the tax year as they seek mitigate tax with investment in exciting innovative companies.
This year more than ever, investor focus will be on innovative medical opportunities, especially those promising to provide relief in the NHS battle against COVID-19.
There have been a number of high profile products from listed companies helping the coronavirus crisis such as Novacyt’s COVID-19 testing kits, but some of the real innovations may be unlocked in unlisted companies that could benefit from EIS investment.
Andrew Aldridge, Partner at Deepbridge Capital, has highlighted investors can help innovations in the healthcare sector by investing in companies that are directly providing treatments and researching therapies and vaccines for COVID-19, as well as those developing ventilators.
In addition, Andrew Aldridge suggested EIS investors should also consider companies providing relief to the ongoing strains on the NHS such online healthcare delivery platforms, technologies to assist with remote working and devices designed to minimise human contact.
“These companies are quite rightly receiving commercial interest in the acquisition of products but in order for them to be able to scale up research development and manufacturing, they also need venture capital. The EIS is therefore a key Government weapon in this current fight,” said Andrew Aldridge.
“By utilising the EIS, investors can benefit from generous tax reliefs (potentially including income tax relief mitigation, CGT deferral, IHT mitigation and loss relief), whilst also directly assisting the UK’s healthcare and economic battle with Coronavirus. Delaying investments should not be an option. Investors and financial advisers should be speaking with EIS product providers in the life sciences and tech sectors and asking how they can help raise much needed funds.”
“The NHS staff, the supermarket workers, those ensuring the UK continues as best to continue to operate with some vague degree of normality are quite rightly the heroes of the hour. However, investors can have a major impact on this scenario by ensuring that innovators have the resources to expedite their innovations which can make a real distance.”
Investors choosing to invest through the Enterprise Investment Scheme get numerous tax benefits including 30% tax relief and exemption, capital gains tax and relief on any losses.
Economic recovery
The Enterprise Investment Scheme can not only help with the funding of medical companies fighting coronavirus but will be instrumental in helping the UK economic recovery.
SMEs employed 16.6 million people in 2019, representing 60% of the working population and the backbone of the UK economy.
While the Enterprise Investment Scheme provides investors with generous tax benefits and the potential of huge returns, it also supports employment in innovative and high growth sectors such as technology, healthcare, food and drink, and sustainability.
The importance of the EIS was highlighted by Director General of the Enterprise Investment Scheme Association, Mark Brownridge, who has been lobbying government to increase reliefs given to investors in an effort to further support investment during the coronavirus slowdown.
He said: “we believe it is perfectly achievable to implement these recommendations in the short term and that they will facilitate faster and increased deployment of capital to entrepreneurial businesses.”
“We estimate that between £100m to £200m of addition private investment could be achieved right now to support the businesses that represent the future, but without this additional support they may well not achieve their full potential, or at worst may fail. We strongly urge the Government to review our recommendations”
