Stephen Slater – Planting the seed of recovery

ANYONE looking for positive financial news over the last few months would know how needle owners must feel when confronted by the proverbial haystack.

But in among reports of the eurozone’s continuing travails, the UK’s lacklustre GDP figures and persistent jitters on the world’s stock markets, a small domestic bright spot could clearly be discerned in July, if you knew what you were looking for and it’s one that could have a very positive impact on ambitious businesses across our region for years to come.

Having been first trailed in the Chancellor’s Budget speech last year, the law enacting the new Seed Enterprise Investment Scheme (SEIS) received Royal Assent over the summer and it has already attracted a great deal of interest in the business investment community.

The SEIS aims to help small, early-stage trading companies with up to 25 employees and assets of up to £200,000 raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies.

It gives income tax relief worth 50% of the amount invested to individual investors with a stake of less than 30 per cent in such companies including directors who invest in their companies.

The scheme complements the existing Enterprise Investment Scheme (EIS), which offer tax reliefs to investors in higher-risk small companies, and, in HMRC’s words, “is intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate than that offered by the existing EIS.”

What this is likely to mean in practice is that both investors and investees will have more financial flexibility with which to shape the deals that they put together, which can only be a positive outcome for people looking to either find or offer a home for this sort of capital.

In fact, even at this early stage, I’ve already spoken to individual investors who have unequivocally said that, without the incentives offered by the SEIS, deals that they’ve done would not have got over the finishing line.

Stephen Slater, director at RMT Accountants & Business Advisors