Research conducted by the EIS and SEIS representative organisation, the EIS Association suggests that Independent Financial Advisers (IFAs) are hesitant about advising clients to invest in SEIS opportunities due to the perceived risks associated with the product, as well as concerns about the impact on PI Insurance and compliance. Notwithstanding these concerns PI and Compliance specialists spoken to by the EISA both felt that neither should be an issue.

Seed EIS was created by the government in 2012, to help and support start-up businesses.To encourage investors to support these businesses, the government offered generous levels of tax reliefs, to compensate for the risks that are inevitably involved with start-up businesses (50% Income Tax Relief, as well as Capital Gains Tax Relief and Loss Relief should a company fail).

In our post pandemic world, the need to support and encourage start-up businesses is more important than ever, yet the use of SEIS by IFAs and financial planners is not as great as it might be.

The research commissioned by EISA from Bulletin Marketing, and sponsored by Nova Growth Capital, one of the leading Seed EIS fund managers, identified that there seemed to be little awareness of how the SEIS product has matured over recent years, but that there were key aspects where IFAs looked for additional reassurance from Fund Managers, as follows:

• The quality of the management team and their track record

• Portfolio diversification

• Honesty about failures

• Evidence on how the fund manager is working with the founders and not just deploying capital.

One of the key messages that came out of the research was that advisers want more education about the product and would welcome a simple guide for their own clients. They would also like to have more examples showing how Seed EIS can be used in practice.

Mark Brownridge, Director General of EISA said:

‘This research has been invaluable in helping us to understand the issues that some advisers face, and what we might be able to do to remove the barriers that exist. We look forward to working with advisers to deliver the training and education they are looking for. We are very grateful to Nova for sponsoring this research.‘