Looking back on a quarter-century of the EIS, Andrew Aldridge argues the tax-efficient investment has never been more popular or indeed more relevant to the wider economy

The past month has been a particularly reflective one for me, causing me to look back at the last 25 years. I am honoured to be a patron of the Tim Parry Johnathan Ball Peace Foundation, a charity set up by the parents of 12-year old Tim Parry – Colin and Wendy – who was murdered in the IRA’s bombing of Warrington in March 1993.

As we commemorated the 25th anniversary in March we have naturally looked back at events over the last 25 years ago and the subsequent passage of time. Much of our reflection has been about the overwhelming positivity that came from such a wicked act.

The people of the UK and Ireland came together to say ‘no more’ and Tim’s parents formed the Foundation, which has gone on to do a huge amount of truly remarkable work with survivors of terrorist attacks. The Foundation, and the work it does, has arguably never been more relevant – following the 2017 attacks that took place in Manchester and London, it currently works with more than 700 families from those two cities. It also works with youngsters at risk of extremist views, leading them away from such actions.

A wider reflection on the past 25 years has reminded us all about what a hugely different place the world is now, compared with what it was in 1993. Much of this change has been brought about by technological and medical advances of course – for example, while the Office for National Statistics (ONS) did not record the percentage of homes with a mobile phone in 1993, jump forward to 1996 and figures show this to be 16%, compared with more than 95% of homes in the UK now having at least one mobile phone.

According to Statista, meanwhile, globally there were fewer than 35 million mobile phones in use in 1993 compared with nearly eight billion today. The last quarter of a century has seen unprecedented technological advancement and that pace of advancement shows no signs of abating.

Similarly, advancements in life sciences and medical care have seen the average UK life expectancy increase from 76.3 years in 1993 to 81.6 years in 2015 – again, according to the ONS. Over the same period Cancer Research UK states cancer mortality rates in the UK have also decreased by 26%. The UK is at the heart of this life sciences sector and we have seen numerous innovations being founded here.

1993 also saw the UK government introduce the Enterprise Investment Scheme (EIS). With more than £20bn having now been invested in young British companies via EIS, this scheme has served various purposes over this time period and has evolved. Originally formed to help young companies attract funding they might otherwise struggle to raise, EIS later became a key driver for encouraging investment into renewable energy as the government chased EU renewables targets.

The EIS has also been a useful tool for the British film industry but is now refocused towards growth companies. This latest iteration of EIS focus is aiming to ensure investors take an appropriate level of risk with their investment – which seems fair given the generosity of the EIS tax reliefs – while also seeking to grow skilled jobs and support the growth of UK plc through the development of intellectual property-driven ‘knowledge intensive’ companies.

Funding Enabler
The EIS continues to be an enabler for providing funding for growth companies, such as those within the technology and life sciences sectors. The Chancellor has regularly stated his commitment to supporting the UK’s digital economy, tech innovations and the life sciences sectors. His recent updates to EIS and the planned consultation around a potential knowledge-intensive EIS fund structure continue to show the appetite for ensuring these sectors in particular are well supported.

As technology and life sciences EIS experts, we invest in some cutting-edge companies that will ensure the next 25 years see further advancements and changes to the world around us. EIS encourages UK investors to share in the potential growth from such companies by providing a degree of risk mitigation by way of potentially generous tax reliefs. With financial advisers and investors increasingly looking for tax-efficient opportunities, the EIS has never been both more popular or more relevant to the wider economy.

Andrew Aldridge is partner, head of marketing at Deepbridge Capital.

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Source: Professional Adviser



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