Budget Review - November 2017

The Autumn Budget 2017 delivered good news for Deepbridge and for innovative companies seeking funding via the Enterprise Investment Scheme.

A few of the salient points relating to the Enterprise Investment Scheme were outlined in the Budget.  Please find brief synopses below of what we perceive are the key points.

From 6th April 2018:

Investors:

  • Annual subscription limit for EIS investors will be doubled from £1 million to £2 million, provided that any amount above £1 million is invested in knowledge-intensive companies;

Investees:

  • Annual investment limit for knowledge-intensive firms will be doubled from £5 million to £10 million;
  • More flexibility for knowledge-intensive investee companies with respect to the age limit, specifically the company can elect at what point the 10 year period starts, either the date of first commercial sale or the point at which turnover exceeds £200,000.

Managers:

  • Consultation will start for a new knowledge-intensive EIS approved fund structure and could contain further incentives provided to attract investment;
  • From the Royal Assent of Finance Bill 2017-18, a principles-based test will be used to assess the focus of tax-advantaged venture capital schemes toward long-term growth and development; and
  • Where tax reliefs generate all/most of the investor return with limited risk to the original investment (i.e. preserving an investors’ capital) – these will no longer be eligible.

Andrew Aldridge, Partner and Head of Marketing at Deepbridge commented;

“As anticipated the consultation response to ‘Financing growth in innovative firms’ is seeking to return EIS/SEIS investments back to how they were originally envisaged, and the new principles-based ‘risk to capital’ test is designed to ensure that the investments are made under the EIS in those businesses deemed to be ‘knowledge intensive’, having the potential to develop innovation and are not simply risk-mitigated tax shelters. We are fully supportive of this approach and while it will be interesting to see how this new test works in practise, and what types of business are excluded from EIS/SEIS as a result, our own focus on investing in companies active in both the technology and life sciences sectors would appear to wholly concur with this positioning. Clearly, for those businesses that do qualify for EIS – and those investors seeking to invest in them – there are some major positives from the new measures including a doubling of the investment limits for EIS. To our mind, EIS/SEIS investment is all about supporting highly innovative firms who have the potential for rapid growth, in some of the most exciting innovation sectors in the UK. Our SEIS and EIS offerings will continue to do just that and we feel today’s announcement by the Chancellor confirms the future for these products and wholly validates the direction Deepbridge has taken, and the firms we continue to support, are the right ones. We are pleased that the Chancellor’s clear definition of ‘the spirit of EIS’ matches our own.

“The types of technology and life sciences companies which Deepbridge invests in are all expected to qualify as being ‘knowledge intensive’ and therefore in line with the Government’s objectives for the (Seed) Enterprise Investment Scheme. We are delighted that Deepbridge is fast becoming known as the home of tech and life sciences EIS opportunities and we look forward to continuing to provide financial advisers and investors with access to high quality investment opportunities in such companies.”