There was a surprise boost for smaller business in yesterday's budget as the chancellor doubled EIS relief, the scheme that provides investors into unquoted companies with significant tax benefits.

The Enterprise Investment Scheme (EIS) is designed to offer tax relief on investment into certain unquoted companies. And it, along with its twin SEIS, has been credited as being one of the main reasons why the UK is apparently more entrepreneurial these days. Up until now EIS for a company was limited to £1,000,000. Some critics have suggested that the £1 million limit has had the effect of distorting investment in favour of smaller companies, creating the so-called scale-up problem.

Now the chancellor, Phillip Hammond has doubled the limit to £2 million.

So, does that tick the box?

Tim Ward, Chief Executive of the Quoted Companies Alliance, said: “The Government’s renewed commitment to incentivising entrepreneurs to grow their business sends a strong signal that the UK values those prepared to take a high risk in investing in growth companies. We have patiently and persistently campaigned on this aspect of Entrepreneurs’ Relief reform. This change will remove a major obstacle for growth in small and mid-size quoted companies and end the anomaly whereby entrepreneurs who want to grow their businesses by introducing new shareholders can find themselves at a significant tax disadvantage to external investors. We look forward to supporting the Government to refine the technical detail of the rule change.”

Sancho Simmonds, scale-up lead at Smith & Williamson, welcomed the move, but felt that the UK entrepreneurs need support that is more nuanced. He said "Access to long-term funding is critical to helping the UK’s high potential young businesses succeed. While many were worried about a cut, a raising of the investment limit for EIS is a big boost for scaling businesses. However, we need the government not to focus just on the creation of entrepreneurial tech businesses, but on their ability to scale and longevity. It is successful scaleable businesses the UK needs, not volume.”

He explained that there are five key areas that almost every business struggles with as they scale up:

  • Access to finance;
  • Professionalising core business functions and developing leadership capabilities;
  • Growth through acquisitions;
  • Hiring and retaining top talent; and
  • Having access to the right external markets to trade.
And added "The Chancellor has missed an opportunity to look at these areas as focal points for opportunity. A lot of good work has been done by government already, such as from Scale-Up Minister Margot James, as well as private sector bodies such as the ScaleUp Institute but without a central organising force it’s a little haphazard. More joined-up thinking would be most welcome."

Others focused on complexity. Nimesh Shah, Partner at Blick Rothenberg said "Doubling the EIS limits for innovative companies will encourage even more private investment," but "the Government now needs to simplify the EIS rules!"