neil dillon swoop head of equity feature blog post seedrs academy

This is a guest post by Neil Dillon, the Head of Equity at Swoop Funding. Neil is responsible for finding start-up funding for Swoop clients and building out their venture capital network by sharing his expertise and straight talking advice on the equity funding landscape and ways that can maximise a startup’s chances of success.

The Enterprise Investment Scheme (EIS) has been very successful at attracting more investment in early stage startups in the UK. As Head of Equity at Swoop, I work with a large network of investors who are often only looking at investments under SEIS (Seed Enterprise Investment Scheme) or EIS. For this reason, I encourage all my clients to apply for EIS advanced assurance before approaching investors. The vast majority of UK businesses are eligible for the scheme and the advanced assurance gives investors peace of mind that the investment has good potential, and they can benefit from the scheme if they invest.

Now we’ve covered the basics, let’s take a closer look at the benefits of EIS for both investors and founders. 

The benefits of EIS for investors include: 

  • Ability to write-off 30% of their investment against their tax bill 
  • No capital gains tax on the profits from the investment
  • No inheritance tax needs to be paid 

The benefits of EIS for founders include: 

  • Makes their business proposal a more attractive investment proposition as it reduces the risk associated with investing in their business 
  • Ability to raise up to £5m in any given year and up to £12m in the lifetime of the business 
  • Encourages investors to invest in early-stage businesses which otherwise might be thought of as too risky 

As a founder, raising investment for your company can be a complex process so why not maximise your chances of success and ensure you’re not missing out on all the investors who will only invest under the EIS scheme. 

We’ve partnered with Sapphire Capital to make the process of applying for S/EIS Advance Assurance easier and simpler. Learn more about the application process here.

Why is it beneficial for businesses to fund before the end of the tax year?

In general, the impact of Covid-19 has put significant pressure on businesses owners. Securing funds now could help bolster your business so it’s in a stronger position as we approach 2022. 

More specifically, a high proportion of early-stage investment follows a seasonal pattern in light of the EIS scheme, with the majority of investments taking place in February and March, i.e. when the tax year ends. Why? 

  1. It’s a common misconception that EIS funds must be invested within the tax year. The EIS scheme allows for tax rebate carry backs, meaning the rebate can be claimed in your next tax claim, including after an investor’s tax return has been submitted for the year. Rightly or wrongly, this is when a lot of investments are done so you don’t want to miss the boat by not showing you qualify for EIS and waiting several months before VCs are ready to look for more deals. 
  1. This is often a result of venture capital funds still having funds, or ‘dry powder’, that have been raised and needs to be deployed before the end of the tax year. Again, don’t miss the busiest time of year for investors. Be prepared and get your pitch deck in a strong position. 

Like most industries, venture capital investment has its busy times and its lulls. It’s no surprise that the festive period and Summer holidays do not fall into the busy category, but it may be news that February and March does. So, if you’re looking to raise some capital, then this is the time to do it.

Ready to raise funds for your business? Apply for funding now on Seedrs.