Equity Investment Opportunities UK: The Lowdown

office workers reviewing graphs

office workers reviewing graphsWhat are the options for equity investment in the UK? Two government-backed venture capital schemes are the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). Both of them enable investors to buy equity in small and medium-sized companies and social enterprises.

Introduction agents, such as Amyma in London, list these schemes as investment opportunities UK that can offer high yields, albeit with a high risk also, due to the companies being small and, in some cases, untested.

What is the Enterprise Investment Scheme?

The EIS enables companies with less than £15 million in assets to raise up to £5 million a year in investment, capped at £12 million over the course of the company’s lifetime. This includes amounts raised through other venture capital schemes, not just the EIS. Investment also has to come early on in the company’s journey – within seven years of their first commercial sale. The rules are different for knowledge-based companies.

The bonus for investors is that they get tax relief on their investment. There are various rules to follow to qualify for the tax relief and they must be adhered to for three years following the investment.

Companies who can use this scheme must meet the following criteria:

  • Be UK-based
  • Not trading on a recognised stock exchange
  • Not in control of another company
  • Not controlled by another company
  • Not have gross assets of more than £15 million
  • Have fewer than 250 employees
  • Carry out a qualifying trade –see the full list on the HMRC website.

Investment opportunities UK: Seed Enterprise Investment Scheme

This is similar to the EIS, in that it offers tax relief to investors and is for UK-based companies within the qualifying trades. Funders receive 50% tax relief on their investment.

This is designed to give new and very small companies a kick start.

Other criteria are:

  • Investors can buy up to £100,000 of equity a year, which can be in more than one company and must not represent more than a 30% stake in any one company;
  • Companies can only raise £150,000 through the SEIS;

The company must have less than 25 employees and be less than two years old, with assets of less than £200,000.