Speaking at the VCT and EIS Investor Forum on Tuesday 26th November, Lord Flight, Chair of the EIS Association (EISA) for the past eight years, has highlighted the need to improve the attractiveness of approved EIS funds – something he referred to as the "Cinderella" of the EIS world. Currently, HMRC approved EIS funds must invest 90% of monies raised across a minimum of four companies within 12 months of the investment opportunity closing in order for investors to benefit from the associated tax advantages. In addition, all investments have to be pro-rated across all investors. The advantage of an HMRC approved fund is that tax relief is given to the investor on investing into the fund but the consequences of missing one, or all of these conditions (and thus succumbing to 'clawback' and/or deferral of relief) means that few approved funds have ever been launched. The market is made up, therefore, largely of unapproved EIS funds. It will be interesting to see how HMRC, and the industry at large, responds to Lord Flight's call.

In addition, Lord Flight paid tribute to HMRC's efforts to focus more attention on speeding up the EIS pre-clearance process, saying: "The EIS industry is in good health, with scope to grow" as baby boomers ponder inheritance tax issues. He also discussed the professionalism behind EIS funds, suggesting that the benefits arising from good quality management and analysis far outweigh the associated costs, and looking ahead, that investee companies might look to take on these costs.
 

Also speaking at the Forum, Martha Lane Fox, the Opening Keynote Speaker, co-founder of Last Minute.com and a serial angel investor, pleaded for a longer term perspective when growing start-ups to full-scale businesses in the digital world. "The EIS market should not be about tax breaks compensating for risk", she repeated – a common theme at the event.
 

Speaking from the Forum, TT's Investment Manager, Catherine Deptford said: "There is very much the sense of a growing industry here, a sector with some momentum now behind it. Competition in the EIS marketplace is growing, and that's a good thing as it's bringing more investment management companies to the fore, and more relevant experience to the EIS selection process. One area that raises food for thought is the question of risk; do prospectuses and Information Memorandums properly explain the notion of risk? That's definitely one for us to think about and act on. If we can get this right, then we can satisfactorily demonstrate the level of high quality advice emanating from our team."

For more information on the VCT and EIS Investor Forum, please see: www.vctandeisinvestorforum.com