The amount of money raised through the enterprise investment scheme (EIS) has fallen for the first time in five years, according to the latest statistics from HM Revenue & Customs (HMRC).

The tax-efficient scheme saw a 2% drop from 2014/15 to 2015/16, although the £1.89bn raised in the most recent tax year was still the second-highest amount invested into the scheme since it was launched 24 years ago.

The amount of companies raising money through the government-sponsored funding scheme has also fallen, from 1,740 in 2014/15 to 1,645 in 2015/16.

It is the first fall of this kind since 2012 and accountancy firm Moore Stephens said it followed the decision by former Chancellor George Osborne to exclude businesses from the funding scheme that have been trading for more than seven years.

The publication of the statistics comes a few weeks before the Treasury is rumoured to tighten the rules around EIS tax advantages in the Budget when it publishes the outcome of the Patient Capital Review. The scheme has seen £16.2bn raised by 26,355 companies since it launched in the 1993/94 tax year.

Partner at Moore Stephens, Timothy Fussell argued it is “vital” the UK continues to support schemes that incentivise investment into innovative and scalable companies.

“As traditional debt financing remains a challenge for SMEs, the EIS scheme has proven to be a useful tool for attracting investment,” he said.

“Recent changes to the EIS and the Seed EIS have made it even harder for early-stage businesses to get their hands on funding. SMEs will be hoping that no further adverse changes are made to the EIS or Venture Capital Trust schemes in the Chancellor’s upcoming Budget.

“However, the findings from the recent Patient Capital Review, into long-term funding for innovative firms, suggest that there will be a further tightening of the rules to focus on growth and higher risk activities.”.

Source: Professional Adviser

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