9
INTRODUCTION
With tighter limits on annual and lifetime pension allowances, a freeze on the
IHT threshold until 2019 and a growing awareness of the need to diversify away
from the public markets, increasing numbers of investors and advisers are
looking at EIS as an attractive, legitimate tax efficient investment option.
At the same time, the government is keen to encourage investment into this
important sector of the economy. EIS is an initiative that has support across
all the three major UK political parties. Small and medium sized businesses
are the lifeblood of the UK economy and, as Lord Flight points out in this
report’s opening statement, represent the future giants of tomorrow.
So we have a benign synergy – investors looking for tax efficient investment options
and ways to access a section of UK business that will drive growth over the next few
decades; and a government that wants to encourage this behaviour. These are some
of the factors behind the growth of EIS investment to an estimated £1.5bn in the last
tax year; a figure that could be set to rise to £2billion in the foreseeable future.
The EIS industry is gearing up for this influx of investment and this report is
part of that process. At present there is no single place where advisers and
investors can review all of the various EIS investment options that are available
in the marketplace. The investment register that we compiled in conjunction
with this report aims to capture as many EIS funds, managed portfolio services
and single company EIS investment opportunities as possible, in order to
provide a broad view of the market. Advisers who keep a copy of this report
on file will be able to demonstrate a detailed knowledge of the EIS sector.
We do not rate or recommend any of the investment opportunities, or single
out any particular investment for individual praise or criticism. Our objective
is to provide easily understood information on the market to allow meaningful
comparisons to be made. By bringing more transparency to the sector, we
aim to make it easier for advisers and the investors they represent to consider
EIS investments alongside mainstream, listed equity investments.
As well as considering all of the investment opportunities in one place, this report is
also an educational resource for advisers and professional investors who are perhaps
considering EIS investments for the first time, or want to refresh and extend their
current knowledge base. This report will outline the attractive tax breaks, investment
benefits and risks associated with the EIS, look at some of the history behind the
sector to put it into context and review some potential investment strategies.
We will also delve into some of the recent developments in the marketplace
– new market entrants, emerging trends and potential difficulties – as well
as looking ahead to consider what the next 12 months might hold.
Finally we have also surveyed both advisers and investors to get a
timely temperature check on their perceptions of the market, what
is currently working well and what could be improved.
The intention of this report is to provide the very first
comprehensive overview of the EIS investment market.
