British fintechs call on the Government to incentivise private investors to protect SMEs from collapse
- 10.06.2020 01:32 pm
Buckworths, the UK’s only law firm working exclusively with start-ups and high growth businesses, has yesterday sent a letter to the Treasury requesting the introduction of measures to incentivise angel investors to invest in SMEs that have been adversely impacted by the COVID-19 pandemic.
The letter, which is signed by a further 87 UK businesses spanning a range of sectors including fintech, hospitality, and retail, calls on the UK government to incentivise private “angel” investors to invest in SMEs to help them repay COVID-19 debt and relaunch their businesses.
Buckworths and the 87 other signatories noted that investors providing matched funding under the Future Fund cannot claim EIS on their investment. They argue that this risks excluding earlier stage start-ups and retail, hospitality and leisure businesses from the Future Fund because they will be unable to secure matched funding from “angel” investors. This problem is exacerbated by the fact that many of these businesses have not qualified for CBILS and Bounce Back Loans due to the State Aid restrictions included in these schemes.
To rectify this issue, the letter calls for the Treasury to introduce a temporary tax relief scheme for “angel” investors that is similar in nature to the Enterprise Investment Scheme (EIS) and open to start-ups with a permanent establishment in the UK. This scheme should have a higher upfront rate of income tax relief and Buckworths believe that there should be no time limits on the age of the business so that more established SMEs in the retail, leisure and hospitality businesses can qualify. Introducing this scheme would not only help save a vast swathe of the start-up ecosystem from insolvency but would also see private investors take on the risk of supporting the SME sector thereby preventing the UK government from incurring further debt.
Michael Buckworth, Managing Director of Buckworths said: “The Government has provided billions of pounds of financial support to businesses of all sizes throughout the United Kingdom. We are now asking the Government to help SMEs who struggled to access COVID-19 support raise investment by creating a temporary new incentive scheme for “angel” investors. The huge success of the EIS scheme in funding UK start-ups demonstrates that tax incentive schemes work. Replicating the EIS scheme on a temporary basis with lighter restrictions on qualification and use of funds would encourage the private sector (and not the Government) to take risk and would secure the future of our SME sector to the broader benefit of the British economy.”