SEIS – Startups are thriving, but more must be done

SEIS

It has been a war cry for a number of years now, but the Institute of Directors (IoD) still insists that more simply must be done to push SEIS to startups that remain in the dark about what it is.

In a recent report called ‘Opening the Equity Economy’, SEIS and EIS both came under the spotlight, and the main word that was used in regard to these two schemes: clarification. Although both schemes are regarded – by those that understand them – as being two of the most important pieces of tax legislation introduced in the last 50 years in the UK, it is a sad fact that those that do understand the way the schemes work, are not those the schemes are targeted at.

Revamp

The schemes must be revamped, according to the report, to ensure the rules are clearer and to make it easer for investors and entrepreneurs to understand the benefits. The statistics that accompany the recommendations for improvement are also quite telling, and seem to back up the need for better management, promotion, and clarity relating to SEIS and EIS.

For starters, the report polled IoD members and found that only 38% had heard of SEIS. The majority of IoD members run companies that could benefit from SEIS or EIS, so to have a staggering 62% of them unaware of the scheme is simply unforgiveable. As well as this, the majority (70%) of SEIS funding seems to go into businesses in London and the South of England, something that is all the more surprising when one looks at the thriving Northern tech sector.

In 2013/14 £1.6 billion was invested through the two schemes, but it is thought that with more promotion and a simplification of the process and rules, that figure would double going forward. Unfortunately, another factor that seems slightly off-putting to investors that are actually aware of the schemes is the complicated process and form-filling that goes with applying for the tax relief.

Too much bureaucracy

A number of government entities can rightly be accused of over complicating processes, and enforcing excessive bureaucracy, and it would appear that HMRC are one of the main perpetrators of this, which is a shame when you consider the modern nature of SEIS and EIS, and the fact that they could potentially be at the core of the success for some many of the UK’s youngest, most promising digital tech companies. For the two schemes to be missing out on investment because of the amount of paperwork required is an unfortunate paradox that should be reversed with immediate effect.

SEIS offers some of the most generous tax-breaks out there for investors within the upper tax-brackets, and the scheme has been responsible for a number of notable successes in the startup sector since its inception in 2011, but it is suggested that now is the moment to really press home the importance of the scheme, to modify the process of involvement, and to promote it, particularly in the north of England, which is a current hotbed of innovation in the startup world.

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