EIS will not raise as much this tax year

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Enterprise investment schemes (EIS) will not raise as much money this tax year as they have done in previous years, the managing partner of Rockpool has warned.

Matt Taylor told FTAdviser's Simoney Kyriakou the heady days of every EIS provider raising £30m to £40m in capital fundraising for investments were over.

He said this was largely due to changes over the past couple of years, when former chancellor George Osborne first disallowed solar EIS to continue, and then cracked down on renewable energy EIS.

Mr Taylor explained: "Frankly there are not enough good opportunities available, given the increase in demand that we have seen and it is unfortunate in a way.

"I think we will see a reduction in EIS."

However, he said the demand for EIS investments was still strong among investors and financial advisers. He said: "If I had to say why the demand has been so strong in just one word, it would be - pensions".

According to Mr Taylor, continuous tax tinkering by consecutive governments has made it harder for higher-net worth individuals to set aside money each year into a pension.

Meanwhile, the reduction in the lifetime allowance from £1.25m down to £1m has created a cap on people's retirement wealth that has prompted them to look elsewhere for tax-advantageous savings.

As a result, more people are using EIS as a means of making the most of the 30 per cent income tax relief, as well as the potential inheritance tax mitigation through business property relief, provided the shares are held for at least two years.

Mr Taylor added: "The changes we have seen to pensions has made them almost irrelevant in terms of new contributions to higher earners.

"Advisers had used contributions very widely, and now they are not able to do so, so EIS fits very well for that kind of client base."

He added it was important for advisers to look for a proper return and a "fair share" of returns on EIS investments, as well as the experience of the entrepreneurs behind it and the resources of the managers behind the schemes.