Onside Issue 4 - 23
ONSIDE / INTERVIEW
Ian Battersby
ian.battersby@senecapartners.co.uk
01942 271 746
Ian Battersby is responsible for Seneca's relationships
with wealth managers and intermediaries and evolving
investment strategies.
EIS has been around for a long time hasn't it Ian,
so why the surge in popularity?
Yes it has and over the last few years it has grown
considerably. Commentators are expecting over £2 billion
to be invested into the EIS market this tax year. Pension
rules have capped amounts that high rate tax payers can
invest into their pensions and there are very few genuinely
tax advantageous investments available to investors.
Moreover, the 'renewables' space has also contracted this
year as investments which already attract subsidies are
largely no longer eligible for EIS reliefs. Also, at the time of
going to press, the future for Venture Capital Trusts is less
than clear just to compound things.
And does HMRC continue to support EIS?
Yes, though there have been changes announced through the
Budgets in March and also in July 2015, partly to bring the
UK into line with Europe on State Aid, but also to ensure
that the tax reliefs which are available to investors are being
properly utilised in the provision of capital to companies
who are growing. This creates growth and employment in
a vital sector of the UK economy and ensures that Treasury
are providing all round value for UK taxpayers by managing
the use of these reliefs appropriately.
So is it purely about investors who pay a large
amount of tax seeking to reduce their tax bills
each year?
That's an interesting one! Tax reliefs help mitigate the
investment risk and so if there is minimal or no investment
risk attached then you ought to ask whether it's within the
spirit of EIS.
Our belief is that EIS should first and foremost be an
'investment led' decision not a 'tax led' decision and that
seems very much the direction of travel with the recent
HMRC announcements too. The tax reliefs are given to
support growth in the SME market and anything which is
wide of that is likely to fall foul. In any event, EIS is simply
one mechanism for Seneca to provide capital to suitable
businesses and so the investment rationale always has to
stand up and the businesses we invest in, we would do so
irrespective of tax reliefs because we think the investment
case is strong enough to support the investment upside
potential. Generally however, 'doing it purely for tax' isn't
likely to be a theme that sits well with HMRC for investors
going forward.
23
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Onside Issue 4 - Cover3
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