By Daniel Hunter

HMRC is approving a growing proportion of applications from businesses to raise money under the Enterprise Investment Scheme (EIS) — enabling them to access a crucial source of funding, says Rockpool Investments, the tax efficient private equity firm headed by Nicola Horlick.

Rockpool says that 91% of applications by UK businesses in 2011/12 were approved by HMRC, slightly up from the 89% approvals issued by HMRC in 2010/11.

The number of UK businesses now seeking EIS-qualification to assist with raising funds has jumped by 47% in the last year, from 1,457 in 2010/11 to 2,147 in 2011/12.

Rockpool says that these figures, along with the widening of the scheme introduced last year (see box below), show that HMRC is increasingly enabling UK businesses to take advantage of EIS. This suggests that the Government sees EIS as an increasingly vital way of getting much needed funding to small businesses.

“It has been a year since the Government’s radical shake-up of the EIS rules made it more attractive to businesses and investors. The changes opened up EIS, allowing bigger companies to become eligible, and the tax incentives were also made more attractive," Gary Robins, Partner at Rockpool, said.

“Access to funding from banks for small businesses remains very difficult. This means that funds raised from private investors under EIS are becoming an increasingly attractive and substantial source of finance. This kind of investment is essential if we are going to witness a dynamic and expanding small business sector — something which is critical to our economic well-being.

“It is encouraging to see HMRC playing the role of a pragmatic enabler of UK businesses’ gaining access to tax efficient funding. We suspect that the high level of interest from private investors in EIS will keep HMRC busy going forward!”

Join us on
Follow @freshbusiness