Government told to show restraint on tax relief for startup investment


The government has been warned not to crack down on tax breaks for investors betting on early stage companies amid a major review into funding.

The Enterprise Investment Scheme (EIS) faces an uncertain future as the Treasury is reportedly considering clamping down on the tax-relief scheme which is designed to encourage investment in startups.

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But a group of leading supporters which includes several lords, has hit back at criticisms that the scheme is being exploited warning that curtailing EIS stop the UK from creating world-beating innovative companies.

"Britain’s failure to give sufficient funding support to growing businesses means many fall prey to opportunistic foreign corporations or find their promise unfulfilled," they write in a letter first published in the Sunday Times.

"The government’s Patient Capital Review is a welcome attempt to address the problem. We are, however, deeply concerned that as a result of the review extensive new restrictions are being considered to the Enterprise Investment (EIS) Scheme structure. EIS has proved vital to many of those the Prime Minister celebrated in her recent conference speech – "the wealth creators, risk takers, innovators and entrepreneurs… who generate jobs and prosperity for our country”.

Some £16bn has been invested in 26,000 companies since the scheme was first launched in 1994. A further £178m was invested in a similar scheme for even earlier stage companies last year.

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The results of the review and any changes are expected to be announced in next month's Budget.

The 12 leaders to sign the letter warning on EIS

  • Lord Howard Flight
  • Lord Michael Grade
  • Lord Peter Hain
  • Lord David Blunkett
  • Mark Brownridge, director general of enterprise investment scheme Association
  • Emma Jones MBE (for services to Enterprise), founder of Enterprise Nation and SME representative for Crown Commercial Service
  • Anne Glover CBE, chief executive of Amadeus Capital
  • Dr. Mike Bandar MBE, serial entrepreneur and angel investor
  • Keith Lassman, partner at Howard Kennedy
  • Roger Blears, senior partner at RW Blears LLP
  • John Glencross, chief executive, Calculus Capital
  • Gillian Roche-Saunders, partner, Bates Wells Braithwaite

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