In 2016/17, 3,470 companies raised a total of £1.8 billion of funds under the EIS scheme and to date, a total of £18 billion of EIS funds have been raised since the start of the scheme*. This is an attractive investment pool for fund managers to target as they look to raise capital to support growth-stage businesses, however, it doesn’t come without its challenges.
For fund managers operating in the EIS market, claiming EIS tax relief and dealing with investor queries in relation to it has been an ongoing frustration. This has been caused by the stipulated HMRC claim process requiring a) physical tax certificates and b) wet signatures from the investee companies. This has led to a slow, cumbersome and error prone process as the certificates pass through multiple sets of hands before finally making their way to the investor.
For an industry that has a strong technology focus (In 2016/17, 37% of all EIS investment was made into the Information and Communication Sector*), the claim process has been behind the times. However, this is no longer the case. On 16 October, Mark Brownridge (Director General – EIS Association) announced that HMRC will now be making provision for an alternative to wet signatures with the availability of a Unique Investment Reference (“UIR”).
“..the initial benefit will be that with the introduction of the UIR, HMRC are happy for the company or agent to complete and issue the certificates to their investors in whatever manner suits them – no need for wet signatures. Similarly HMRC will be putting in place arrangements for the compliance statements to be submitted by email.” – Mark Brownridge, Director general, EISA.
But how can fund managers leverage this evolution to improve their investor’s experience? Utilising the primary transaction details maintained by their third-party administrator / custodian is a key starting point. This ensures the investors are relying on single data source from transaction processing to tax filing.
Mainspring engaged with the EISA during its consultation process with HMRC and in anticipation of HMRC’s new approach Mainspring has progressed the development of the first ever digital EIS 3 solution and this is now available as part of Mainspring’s Reporting Services product suite.
Once HMRC releases the new forms this Autumn existing and new clients will be able to utilise this new service to simplify their investor relations and reduce administrative efforts.
If you would like to discuss our EIS solution or Reporting Services product suite, please contact Stephen Doherty, Mainspring’s Head of Client Solutions by email at firstname.lastname@example.org.