Henley-in-Arden, UK, 18 July 2014. Technology specialist Mercia Fund Management forecasts an increased demand for capital growth focused tax efficient investments in the wake of the Finance Bill that received Royal Assent yesterday.
The Bill closes a loophole enabling Enterprise Investment Schemes (EIS) and Seed EISs (SEIS) to invest in renewable energy projects that enjoy additional subsidies from government.
It is estimated that over 60% of the £600m invested in retail EIS funds last year went into renewable energy projects, such as solar farms, that receive additional incentives including Feed-in Tariffs. Beyond the ‘double hit’ to the Treasury, it could be argued that this is investment directed away from supporting new enterprise in the UK.
Mark Payton, MD of Mercia, which has strong links with several British universities and has developed a unique hybrid SEIS & EIS investment approach to support exciting technology focused businesses, welcomed the Bill.
He said: “EIS, and its more recent sister SEIS, have been designed to foster a spirit of enterprise – to mirror Silicon Valley’s venture capitalist culture across the UK. The tax reliefs are the envy of the world. Britain now has the highest density of early stage enterprise of any country and world-leading expertise in life sciences, digital, fintech and e-commerce, but our entrepreneurs need both capital and sustained support to ensure their businesses achieve their potential.
“Beyond the industrial revolution, I don’t think there’s been a more exciting time for UK investment than the opportunities that exist in the technology sector today. The tax breaks with EIS – including between 30% and 50% income tax relief, loss relief, IHT relief and CGT exemption – reduce investment risk significantly and should make supporting these businesses attractive to a much greater number of private investors.
“We expect the changes ratified in the Royal Assent to shift the focus away from low-risk, low-return renewable energy projects, toward a capital growth focus investment strategy, which was the original aim of the government when it created EIS and SEIS. The expanding UK technology sector is a prime target for this investment.
“Last week we saw the successful high profile £70m flotation on AIM of Abzena. The flotation price represented a gain of 170% in under 12 months for investors in Mercia’s hybrid EIS & SEIS fund and we believe Abzena will continue to grow, offering the prospect of significant future returns for our investors.”
“The Abzena IPO serves to underline the opportunities that exist in UK technology whilst reinforcing the impact enterprise investment can have on both the economy and investor’s portfolios, as we see more innovative, high growth British businesses emerging. ”
For more information contact Talon Golding, Mercia Fund Management: tel 0330 223 1430 email firstname.lastname@example.org
Mercia Fund Management is a rapidly growing specialist technology investment business with over £22 million assets under management.
It provides investment growth capital for technology-focused businesses – from those in the early stages of gaining commercial traction through to established businesses that are trading profitability and in need of working capital to expand.
Mercia has strong links with several universities, ensuring a strong deal flow and unusual early access to promising opportunities.
It is distinctive in being able to provide investee firms with cost-effective post-seed incubator accommodation. The Forward House Workspace, at its modern facility in Henley-in-Arden, offers a supportive dynamic environment and centralised support services to help spur growth.
Mercia offers advisers and their clients access to this exciting sector through tax-efficient Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) vehicles.
Mercia Fund Management is an FCA authorised and regulated fund manager under FSMA (FRN: 524856).