EIS 2018 report (web)

56 57 We do like that they’re going to help on the Advance Assurance process, because that can be really time-consuming and frustrating. Our biggest concern is that the government is going to stop us from doing construction. If you drill down into construction, we have a massive housing shortage in the UK; we have virtually nobody else funding this, and HMRC’s own statistics state that every pound invested in construction, creates nearly three for the UK economy. As said previously we feel that the potential for the granting of Advance Assurance for EIS Construction Companies with some changes in how they are marketed remains positive. IB: The Advance Assurance process could do with being quicker and slicker. I will believe the 15-day turnaround when I see it. We’ve got to take it at face value and believe that there’s a genuine desire to deal with that sort of blockage in the system. At 14 weeks currently, and especially at this time of year, that isn’t helpful to anybody. I’d like to see a period of continuity where people understand what the EIS landscape looks like and settle into it rather than constant tweaks to the rules. Probably wishful thinking. The obvious headwinds may come from Brexit. The true effect is somewhat unknown at this point in time. But by and large, our view is that we will deal with that when we know what’s coming. Whilst constantly having it in view, you can end up paralysing yourselves if you sit there waiting for Brexit to become a known quantity. SB: We’ve always said that the limit for SEIS of £150,000 should be higher. With Brexit that may happen - there’s potentially an opportunity there. For SEIS, we’d like to see the limit increased to at least the £250,000 mark. I also think you could get quite clever in the way that you apply that £250,000, because there are quite stringent rules around, such as not being able to do follow-on investment. SEIS could be slightly finessed so that it encourages the growth of the business. At the moment, everything seems to be such a way that it’s working towards what we’re trying to achieve. The concern is that the government keeps finessing and finessing the schemes to the point of going beyond what we’re trying to do at the moment. LC: We already have Seed EIS - what I’d like to see is Thorn EIS as a step beyond EIS. This would enable providers who know their investee companies well to follow on with their funding and take the businesses on to the next stage. Passing this on to a third party is unnecessary and only costs time and money. The Advance Assurance timetable is also proving to be a real issue. Delays to Advance Assurance mean we can’t commit to investments – meaning we could potentially lose out. It would make a huge difference if Advance Assurance worked to a 15- day timetable. It would also enable these schemes to compete more directly with other funding sources in the market. We have no particular concerns for the future of the market, apart from potential tinkering with schemes that are proven to be successful in helping the growth of UK SMEs. AA: Like Sarah, one of the legislative things we would like to see eventually considered is the SEIS limit of £150,000 per company being increased. There have been mixed messages coming out of the treasury about how they see SEIS in the long- term. One of those has been that they understand that £150,000 for some early stage companies doesn’t last very long and doesn’t really enhance the business. So perhaps that needs to be raised to £250,000 or £500,000. However, we are unlikely to see anything like that happening until probably after Brexit’s happened. In general, we were pleased with the fact that the principles-based approach came out of the budget. I think it took everyone slightly by surprise. Some of our peers were expecting sweeping changes with certain sectors being ruled out overnight etc., but actually a principles-based approach seems very sensible. They’re not ruling anything out, but you’ve got to make sure that capital is genuinely at risk and is being used for the right reasons. That makes perfect sense. As an industry, we need to work better and smarter together to make sure that we’re not called into question by the treasury in the future. They need to understand that we have a functioning, working EIS community that is looking to do things for the right reasons, and not just trying to gain tax reliefs for investors. The fact is that with Brexit coming up, we need to encourage inward investment in the UK. EIS is a tangible, real entity that encourages inward investments. MB: EIS is designed to encourage investors to introduce capital into small trading businesses and investors and advisers should not endeavour to de-couple the investment itself with the tax relief the investment is wrapped in. The decision should be made based on the sector, the manager, the team and the track record. The reality is that an investor might not necessarily make an investment into a small unquoted trading company unless they had the safety net of the tax relief which is rightly provided by the EIS, but the investor should have a desire to invest in the given sector. The investment and the tax relief should therefore not be de-coupled, as the EIS is designed to underpin a level of investment risk that would otherwise be unfeasible for most. It is vital that advisers understand this so they can competently advise their clients on the risk/ rewards of this type of investment. Following the recent changes to the EIS legislation, we will continue to focus on ensuring advisers fully understand the implications of EIS qualifying investments. There may also be a slowdown of people making investment decisions over the next year, as there are going to be new factors that advisers and investors need to take into consideration before choosing the right investment opportunity with the right manager. Sector specialism, scale and track record are going to be more of a focus than ever before. Managers will therefore need to evidence that they can deploy capital effectively and in line with the service’s objectives, before then demonstrating that they can competently manage the investment while ultimately helping to realise value for investors. KD: If you were asking us last year, we couldn’t have asked for more from the treasury. They’ve doubled the allowable limits on knowledge- based companies. They’ve allowed investments into them for 10 years. You can have 500 employees in a software company - you’re now talking about a pretty big company. In a manufacturing company that’s a mid-size one, but that can be a pretty big in digital terms. I think they’ve done an amazing job to create that environment. The treasury wants an Instagram in the UK. The big criticism historically is that UK companies grow to a £20 million valuation then want to sell to someone like Zuckerberg who wants to take over the world! The government has let people know off the record that they’d like to see a world champion in the tech sector. Now the ball is in our court, the fund managers, to generate these returns for investors. JOHN SCHAFFER DOMINIQUE BUTTERS ANDREW ALDRIDGE LAURENCE CALLCUT MATTHEW BUGDEN IAN BATTERSBY SARAH BARBER KEALAN DOYLE “We always say that if tax relief were abolished tomorrow, we would still invest in the businesses that we select for our portfolios, because their fundamentals support a growth investment objective.” — IAN BUTTERSBY, SENECA “We’ve always said that the limit for SEIS of £150,000 should be higher. With Brexit that may happen - there’s potentially an opportunity there. For SEIS, we’d like to see the limit increased to at least the £250,000 mark.” — SARAH BARBER, JENSON FUNDING PARTNERS “We already have Seed EIS - what I’d like to see is Thorn EIS as a step beyond EIS. This would enable providers who know their investee companies well to follow on with their funding and take the businesses on to the next stage. Passing this on to a third party is unnecessary and only costs time and money.” — LAURENCE CALLCUT, DOWNING