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AS 2011: Seed scheme has limited appeal for mass market

Advisers say seed enterprise investment schemes designed to boost start-ups will not be of interest to leading EIS providers.

Chancellor George Osborne said from April 2012, investors in Seis will benefit from 50 per cent tax relief on the first £100,000, regardless of their personal rate of income tax.

Each company is eligible for £150,000 investment in total. Investors qualify for a capital gains tax exemption for the year 2012/13 for gains reinvested in Seis.
Hargreaves Lansdown investment manager Ben Yearsley says: “It will be beneficial to friends and family rather than reaching the bigger EIS companies. I cannot see anyone promoting a company where they can only raise £150,000 and then no one will reach out to IFAs to highlight the company.”

Chelsea Financial Services head of investments Matthew Woodbridge says: “There will be limited appeal for the mass market. If you had a £10m EIS fund of these companies you would need more than 60 companies in it and it would be very early-stage companies, which makes it high risk.”

But Oxford Capital investment director David Mott says the scheme will encourage business start-ups.

He says: “By allowing 50 per cent income tax relief and CGT relief of 28 per cent in 2012-13, people backing start-ups will only be risking 22 per cent of the capital they invest.”

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