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EISA recommendations for mitigating the impact of coronavirus on early stage businesses

23 Mar 2020

The Enterprise Investment Scheme Association (EISA) has produced recommendations to assist early stage businesses in response to the coronavirus crisis. This is as a result of the rapidly escalating threat that the outbreak is creating for Small and Medium Enterprises (SMEs), which the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) support. 

The EISA notes in particular that many EIS and SEIS companies are in the healthcare sector and help to relieve pressure from the NHS by providing innovative healthcare solutions. The loss of these companies at a time like this could be hugely detrimental in the fight against coronavirus. 

The EISA’s recommendations are temporary measures which it believes have the potential to unlock between £100m-£200m of funding from private investors, as well as saving a significant number of jobs from being put at risk. Below is a brief summary of the recommended temporary changes (including relaxations) to the primary EIS legislation – the Income Tax Act 2007: 
  • Raising the rate of income tax relief for EIS and SEIS to 60% (section 158);
  • Relaxing the requirement for growth and development (section 174);
  • Dis-applying the following requirements for pre-April 2021 investments:
    • Maximum risk finance investments (sections 173A-173AB);
    • The permitted maximum age requirement (section 175A);
    • The financial health requirement (section 180B); 
    • Connection-directors excluded (section 168); and
    • Connection-existing shareholdings requirement (section 164A). 
In addition, to enable businesses within EIS and SEIS portfolios to benefit to the fullest extent possible from additional measures announced by the Government, such as the Coronavirus Business Interruption Loan Scheme, the EISA requests that scheme be made available to businesses that have already received state-aid funding.

If you would like advice on any of the above issues, please get in touch with your usual contact at DMH Stallard LLP, or Nick Williams (nick.williams@dmhstallard.com) or Nuria Ashmore Barrios (nuria.ashmorebarrios@dmhstallard.com) in the Corporate Team.

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