The burden of meeting the 2015 EIS rule changes is disproportionally falling on entrepreneurs. And those of us who suspected that small businesses were going to be the losers have seen just that happen.
HMRC released the April 2017 Enterprise and Seed Enterprise Investment Schemes statistics last week. Despite a drop of around £230m in EIS fundraising in 2015-16 from the last year, the total raised, £1.65bn, was the second highest since EIS began. And SEIS fundraising was reduced by £8m, falling to £169m.
However, Mark Brownridge, Director General of the EIS Association comments that “Of more concern is the reduction in the numbers of applications obtaining approval from HMRC. Down from 80% to 70%. … We continue to have major concerns about the current state of HMRC’s Advance Assurance system and the figures go to show that this is now having a negative impact on exactly those small and scale up businesses for whom EIS was originally intended to help start, build and grow their business.”
So Brownridge sees an important problem with the attempts to tighten the regulations up. The consequence is that it’s the small businesses the scheme was set up for who are suffering.
One of the major consequences of the 2015 rule changes is on regulatory and compliance costs. The changes make it more difficult for genuine small companies to seek advance assurance without engaging quality professional advice. An expense not always easy for entrepreneurs to cover. Therefore, the more compliance you add, the more you exclude the people it was originally set up for.
EISA are petitioning to streamline the Advance Assurance System. You can add your name here.