Dear EISA members,
This is quite literally a call to arms – please read and take action.
As you know, EISA have been lobbying hard for significant, short-term changes to the EIS and SEIS schemes to combat the existential threat to investee companies of coronavirus. We know others have too.
Nobody wants to see businesses fail through no fault of their own due to the wider macro situation. So our simple objective for the industry at this time is to continue to facilitate and deliver equity funding from private investors to those start-up and scale-up businesses who have been identified as 1) most in need in the short term to keep them going and 2) have potential to be long term, high growth businesses.
Helping these businesses survive the short term crisis should enable them to achieve their long term ambitions. Once in that position, they will start to pay back that short term trust and investment through significant tax revenue and employment for the benefit of the UK economy (and boy, are we going to need that in the coming years!).
And don’t forget many of these are knowledge intensive based companies directly and indirectly involved in the fight against coronavirus!
Through our discussions with HMT this week, we have been told that if we want the Govt to direct more taxpayer support into the tax-advantaged VC sector, or remove restrictions on fund-managers which were reconfirmed during the PCR, we need to provide them with a clear evidential base for what that increased tax support is expected to produce.
EISA are therefore asking for you to provide us with examples of this evidence. Specifically:
- Fundraising – Evidence for how difficulties in fund-raising by fund-managers are already translating into effects on investee companies.
- Numbers – Evidence of how many firms are failing to get EIS investment they would previously have expected, and over what timescales.
- Investor retreat – Evidence for how the Govt can know whether the reported falls in investment from private individuals is a long-term situation (i.e. they now dislike the EIS category as an asset class); or rather whether this is a short-term pause, as investors wait for market conditions to settle somewhat. Obviously, if investors are merely waiting for short-term volatility to settle, then it’s less clear why the Govt should implement a measure that lasts for at least a year (e.g. IT relief) or more.
- Effect of EIS changes – Evidence for the incremental effects of any new EIS change compared to the status quo.
- Pace of change – Evidence for how quickly any increased tax support will be passed onto businesses that need additional cash injections.
- Direct v Indirect – Evidence for why the Govt should want to support companies only indirectly through investors, rather than pursuing non-tax measures that target the companies themselves.
We feel, from our discussions, that the door to potential short term changes has opened slightly.
Therefore, if you want to see changes to the scheme as EISA have already outlined and I know many of you do, including raising the rate of income tax to 60%, then we need you to act now and quickly.
Help us, help you by providing us with the evidence highlighted above urgently so we can collate responses back to Government. Please note, to be effective, this must be in the form of evidence rather than vague, non specific generalisations on issues.
Please email me directly with your examples of evidence, noting which bullet point above they cover – I look forward to receiving them at: email@example.com