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Too Few Investors Know About SEIS

British entrepreneurs and investors are showing a startling lack of knowledge about two schemes designed to give them tax breaks and boost investment in start-up firms.

Both the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) and have been created by the government to encourage funding for new firms.

By doing so, investors become eligible for generous tax reliefs which include being able to claim up to 50% against income tax for a SEIS.

However, the research by entrepreneur club E2Exchange has revealed that both schemes are largely unknown to the people they are meant to encourage to invest.

Among the more surprising results from the survey is that 25% of entrepreneurs in the UK claim never to have heard of EIS, while another 40% said they had never heard of SEIS.

Unaware of SEIS tax breaks

When asked about tax relief benefits available under EIS, 35% of entrepreneurs said they were not aware of any.

Nearly half of those surveyed were unaware of the tax relief benefits available under SEIS and 90% said they had not used the scheme to raise funding for their business or as an investor.

The figure was rather more encouraging for EIS schemes – 60% of entrepreneurs said they had used EIS for raising funds or as an investor.

Many said that more should be done to promote the schemes and that neither their financial advisers nor banks had mentioned them.

Adrian Walton, a tax partner at accountancy firm Smith and Williamson said: “The lack of awareness among entrepreneurs of EIS and SEIS is a concern but not unsurprising for SEIS, which started in April last year.”

Raise SEIS awareness

He added that most entrepreneurs felt that the rules of both schemes are too restrictive for the type of trading activities which qualify and for the securities that can be issued to investors.

As a result of the survey, E2Exchange has four proposals aimed improving EIS and SEIS popularity.

They include splitting tax reliefs between EIS and SEIS, improving preferential rights under the schemes and widening the number of sectors which are eligible for funding.

E2Exchange is also urging the government to double £150,000 maximum investment under SEIS as, they say, this is too low for most entrepreneurs looking for funding.

The survey also highlights the government must raise awareness of SEIS and EIS, not only among potential investors but the business community as well, especially as nearly two-thirds of entrepreneurs did not know the difference between the two schemes.