EIS 2018 report (web)

6 7 2017 was a rollercoaster year for EIS and SEIS, culminating in the November budget with a number of changes to the schemes. At times, some of the rhetoric we have experienced has felt like a shot across the boughs of EIS and SEIS, particularly with the findings of the Patient Capital Review and the resultant budget. With many whisperings of severe restrictions being placed on EIS and SEIS and perhaps its complete withdrawal, the eventual outcome, with increased limits (for knowledge intensive companies) and a new risk to capital condition, felt like a victory for those campaigning for EIS and SEIS to continue to offer support to high growth, high-risk entrepreneurial businesses. Nevertheless, it came with strong signals that it was time to behave and fall in line with the government’s strategy for small business investment. This came in the guise of the changes that were aimed squarely and evenly at the capital preservation end of the EIS market. As a result, many providers of EIS and SEIS funds will be forced to either completely alter their investment proposition to accommodate those changes or leave the market entirely. My sympathies go out to those for whom the budget changes impacted negatively, as it’s never pleasant to be told that the party music has stopped and you can’t dance anymore. For the rest of us, we now have more crystal clarity than ever about where HMT and the government see the future of EIS and SEIS. Both schemes received overwhelming support from across the political and economic sector, particularly from those businesses that have received EIS or SEIS funding with many noting they would not have been able to start or grow their business if the schemes were not in place. So, where do we stand now? It’s almost back to the future, going back to the very origins of why EIS first came into being but with a digital age, 2018 edge. EIS and SEIS investments should be focused on supporting both those businesses who would otherwise struggle to gain access to funding and also those businesses that are seeking not just to grow but to grow quickly and, as such, are high risk, therefore warranting the need for investors prepared to take that risk to be rewarded in the form of tax reliefs. Technology, growth and innovation would seem to be EIS and SEIS’s new best friends as both the Patient Capital Review and the Industrial Strategy paint a picture of a bright new technological revolution led by UK PLC’s small businesses. This is a great vindication for EIS and SEIS and a real shot in the arm for the industry. It’s now up to us to heed the message from government and deliver on this vision! If 2017 was tainted with uncertainty, we start 2018 more hopeful than ever for the future of EIS and SEIS. All of this means the AIR report from Intelligent Partnership becomes more important than ever. As EIS and SEIS funds slowly change and morph over time to align themselves with this new dawn in EIS investing, advisers and investors will need to learn the rules of EIS and SEIS investing all over again and start to discover new areas of investments, funds and strategies that perhaps previously they had dismissed or not given thought to. As ever, the AIR Report cuts right across the industry and delivers informative and educational research. My advice? Keep it close to hand on your desk throughout the year as it acts as an essential EIS/SEIS resource. MARK BROWNRIDGE Director General EISA OPENING STATEMENT A WORD FROM THE DIRECTOR GENERAL OF THE EIS ASSOCIATION We couldn’t do this without the help and support of a number of third parties who have contributed to writing this report. Their contributions range from inputting into the scope, sharing data, giving us their insights into the market, providing copy and peer-reviewing drafts. Some of them have inputted directly and some of them were good enough to share their thoughts and ideas over coffee or at various conferences and events. So, a big thanks to: Andrew Aldridge, Sarah Barber, Ian Battersby, Mark Brownridge, Matthew Bugden, Dominique Butters, Laurence Callcut, John Cornelius, Kealan Doyle, Stephen Geddes, Dennis Hall, Stephen Jones, Faisal Sheikh, and Andrew Tustin. Their input is invaluable, but needless to say any errors or omissions are down to us. We have relied upon MICAP for most of the data that we have based the report upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desktop research by examining brochures, investment prospectuses, mystery shopping providers and crawling through the websites to verify their data. The report is made possible by our sponsors, who have contributed copy to the report on pages 69 to 79 and supported us by helping to meet production and printing costs. So, a big thanks to Blackfinch Investments, Deepbridge Capital, Downing, Ingenious, Jenson Funding Partners LLP, Seneca Partners, and Symvan Capital. REPORT OVERVIEW ACKNOWLEDGEMENTS AND THANKS Understand the main changes to EIS introduced by the Autumn budget, 2017 and their potential impact on the EIS market. Be able to identify the recent trends in EIS fees, including the pros and cons of fees charged to the investor and fees charged to the investee. Be aware of the key strengths, weaknesses, opportunities and threats currently in the EIS market. Pinpoint recent changes to key EIS investment metrics such as target returns, minimum subscriptions and strategies. Be able to benchmark current products and providers against each other on key investment criteria. Recognise how the adviser community is currently interacting with EIS and its areas of confidence and concern. LEARNING OBJECTIVES FOR CPD ACCREDITATION We are required to state these in order to qualify as accredited for Structured CPD. By the end of the report readers will: