Flagship Government scheme to encourage investment in small British businesses used by over 2,300 estates last year
by Growthdeck Team
26 August 2022News EIS tax
Note: The contents of this article are the author's opinion and have not been approved as a financial promotion.
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2,320 estates in the UK made use of Business Property Relief last year*, which allows individuals to pass on investments in private companies without having to pay inheritance tax on them.
Business Property Relief encourages people to invest in small and other unlisted British businesses that might otherwise find it hard to secure finance. This comes in exchange for people being able to pass them to heirs free of IHT.
Simon Emary, our COO, says the relief plays a vital role in plugging a significant funding gap for growth businesses. He explains that young scaleup businesses often have difficulty finding equity investment when they have outgrown angel investment but are not yet big enough for larger private equity funds.
Investments from groups of high-net-worth individuals can be an effective way for these businesses to reach the next stage of their growth.
Emary says that even more people should be exploring these investments as they plan their inheritances. He adds, however, that too few people understand how to access investments in unlisted companies.
A simple way for individuals to invest in unlisted companies is via the Government’s flagship Enterprise Investment Scheme (EIS). By investing in these companies using EIS, individuals can claim Business Property Relief to reduce the amount of IHT that will be due on their estates.
Simon Emary says:
“These figures show Government policy working exactly as intended — British scaleup businesses are getting the funding they need to grow as a result of backing from private investors.”
“That investment will create high-quality British jobs and ultimately increase the UK’s tax base as these businesses grow.”
“More people should look into whether these investments could play a role in their plans for passing on their wealth. Investing in scaleup businesses is something that a lot more people would do if they knew how.”
* 2018/19 tax year (most recent available). Source: HMRC
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