The number of investments made into UK small businesses through the tax efficient EIS scheme rose by 11 per cent from 122,320 in 2013/14 to a record 135,445 in 2014/15.
The number of companies raising funds through the Enterprise Investment Scheme (EIS) has also risen, jumping by 10 per cent from 2,820 to 3,130 in the last year, according to a study by Radius Equity.
The EIS scheme is designed to encourage investment into the UK’s small businesses, and is one of the only government-supported tax break schemes available to small and medium-sized enterprises (SMEs).
As part of the scheme investors receive 30 per cent initial income tax relief, whilst also benefitting from profits free of capital gains tax.
Radius Equity says that the number of investments made into EIS compliant businesses has more than doubled in the last two years, having been just 64,200 in 2012/13.
The firm also reveals that the tax relief offered through the government-backed scheme is one of the main attractors for investors choosing to invest in EIS-compliant small businesses.
This rise has also been driven by the growing popularity of crowdfunding as a means of investment. Radius Equity explains that 96 per cent of businesses on crowdfunding platforms are EIS or SEIS compliant.
Gary Robins, director at Radius Equity says that it is clear by the increasing numbers of investments made through the scheme year on year that small businesses that are EIS compliant are very attractive investment opportunities for high earners.
He adds that crowdfunding has helped raise the profile of the scheme for those affluent investors looking for investment opportunities with competitive returns.
‘SMEs play a vital role within the UK economy so it’s important that they have access to the funding they need,’ he says.
‘With the traditional forms of lending often closed to small businesses, they are increasingly looking for alternative ways to attract this investment.
‘By funding these small businesses through the EIS scheme, allowing them to expand into new markets and create jobs, investors are in turn, helping to drive wider economic growth throughout the UK.’
Since 2012, companies with up to 250 employees and gross assets of up to £15 million have been able to apply for funding under the EIS scheme. This has allowed larger established companies looking for further investment to benefit from the scheme, as well as smaller start-ups.
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See also: Sources of funding to open a restaurant