EIS Industry Report 2019/20

56 57 REPORT CONCLUSIONS WHAT WE HAVE FOUND OUT 1. GROWTH FOCUS WON’T HAMPER THE MARKET Despite experts suggesting that there will be a drop in EIS inflows of as much as £350 million in the next round of government figures as a result of the risk to capital condition, there is good reason to remain optimistic about the scheme’s future. To begin with, it appears that the industry has been heading in the direction of focusing on higher risk investments even before the changes came into force. Further, there is a belief that while the changes will cause a dip in investment as the new changes bed down, the industry will soon get to grips with the new rules and, as a result, inflows will start to rise once again. This is already indicated by the rise in the number of offers on the market in September 2019. Managers are also keeping a close eye on the approach of HMRC in its interpretation of the risk to capital requirements. As a body of evidence begins to build up on what is and is not granted advance assurance, more offers are likely to come to market. 2. EIS HAS NOT KILLED THE FILM STAR Our previous report predicted the end of EIS in the media and entertainment sector because of the increased need to show that every pound invested in an EIS scheme is at risk. While there remains plenty of anecdotal evidence to suggest that the rules are making it much tougher for companies in this sector to access EIS funding, there are signs of the industry adapting. The clearest signal that HMRC is not completely pulling the plug on this sector is the launch of the BFI-backed UK Creative Content EIS Fund, although its individual investments will still require advance assurance. This is positive for the industry, as the sector had been a big part of the EIS market for many years. Alongside the BFI-backed offer, a number of others have received advance assurance. Businesses in the film and media sector are having to change the way they operate to access EIS funding, so this will be a slow process, but it means there remains a route to investment for those willing to make the changes. 3. TRANSPARENCY A KEY ISSUE A lack of transparency in EIS offers is rising up the list of advisers’ concerns, suggesting that there is still work to be done by providers on how they approach their offers. Almost a third of advisers in our survey now rate lack of transparency in their top three concerns when selecting EIS, compared to less than a quarter last year. This growing concern was reflected in our adviser roundtable, where it was at the forefront of advisers’ minds when considering what they would like to see change in the EIS market. It is important to note this growing disquiet among advisers, as it suggests that those creating offers may need to think more deeply about how they present their EIS solutions to the market. If advisers are being put off by concerns over transparency, they will look for other options to recommend to clients. CONCLUSIONS