The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are already critical tax incentive arrangements for start-ups as they offer early investors in qualifying companies 30% – 50% Income Tax relief on amounts subscribed for shares and the potential for tax-free disposals of the shares if the companies reach successful exit events.
Green start-up companies (i.e. companies involved in developing and commercialising some form of climate/eco-efficiency improvement through technology, products or services, for example carbon-capture techniques) are already able to make use of EIS and SEIS incentives to raise capital, but simply via the same regime that other qualifying companies are able to access.
Further incentivisation ideas for green start-ups
Similar to how the EIS rules were made more generous for ’knowledge-intensive companies’ in April 2018 (broadly, companies that are heavily involved in research and development/intellectual property creation), by, amongst other measures, doubling the amount of investment that investors can receive EIS relief for from £1 million to £2 million and increasing the total amount of EIS funds that can be raised by such companies from £12 million to £20 million, specific EIS/SEIS extensions and/or relaxations could be introduced aimed at green start-ups.
Some key areas where these incentives could be made more targeted to green start-ups would be:
- Increasing the investor’s Income Tax relief percentage
- Increasing the quantum of investment that attracts relief for investors
- Introducing a carve-out in the excluded activity of property development to make the relief available for the development of zero-carbon or low-carbon homes.
The introduction of such measures would help to focus high-net worth investors more on green start-ups as new investment opportunities. This would align with general investor sentiment in the current age where such opportunities are high on the agenda anyway, but the added incentive of more generous tax relief could only serve to generate more much needed investment in this space.
If you would like to discuss any of the above, please contact your usual Blick Rothenberg contact or James Pilbeam, using the details on this page.
You can also visit our COP26 Hub where we will share an article written by our experts each day the COP26 conference takes place with a focus on green taxation.