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Welcome for Government consultation on encouraging growth company and seed stage investment
Incentives for ‘business angels’ need to allow more professionalised, risk-sharing approach


July 7 2011

Hotbed, the UK’s leading private investor syndicator, has welcomed a Government consultation on new measures to encourage investment in growth companies.

The consultation proposes a new ‘Business Angel Seed Investment Scheme’ that would offer tax relief on investments in seed stage companies where business advice and support is offered alongside capital. The scheme would offer tax relief on a wider range of investment instruments, including loans, than the existing EIS and VCT schemes.

Hotbed says that the new scheme could be attractive to potential investors. However, they comment that the scheme needs to cater explicitly for professionalised groups of investors in order to ensure that the scheme is attractive to the broadest possible range of potential investors.

Peter Hawkes, Chairman of Hotbed says: “This new scheme could be very effective in helping seed stage companies to access the finance they need.”

“But for maximum appeal we think it needs to cater for groups of investors that want to pool their expertise and share their investments in growth companies.”

“As well as spreading the transaction costs across a group of investors, the due diligence that a professionalised group of investors can undertake is much more thorough.”

“Our network of 900 members also means that we can place an investor or representative on the board of the investee company who has relevant and valuable experience.”

“The scheme needs to accommodate this sort of model by enabling all members of an investor syndicate to benefit from the available tax relief, provided that collectively they appoint a representative or board member to offer expert advice.”

“Last but not least, it is our experience that many companies in need of start-up and growth capital, and indeed, many investors, find the term 'Business Angels' off-putting. Giving the scheme a more neutral name would help to dispel the notion that seed-stage investment is about anything other than hard-nosed business decisions based on a relationship of equals.”

Simplification of EIS and VCT schemes

The consultation document also proposes a number of simplifications to the existing EIS and VCT schemes, which follow from enhancements to the tax relief on offer in the March 2011 budget.

Peter Hawkes adds: “The enhancements to the EIS scheme announced in the budget have already been successful in encouraging interest in investment in smaller companies as we have seen from the response of our own investor members.”

“These new proposed simplifications will mean a welcome reduction in red tape for both would-be investors and companies seeking capital.”

ENDS

About Hotbed:

Hotbed is a specialist supplier of alternative asset investments and is authorised and regulated by the Financial Services Authority. Direct private equity and commercial property investments are made available in £25,000 units and private investors have the flexibility to select which investments they wish to participate in.


Investment into Hotbed opportunities is only available to Investor Members, who must demonstrate that they have sufficient experience, expertise and knowledge to be capable of making their own investment decisions and understanding the risks involved in making Hotbed investments.

Press enquiries:

Nick Marsh

Hotbed

Tel: 020 7569 1440

Catherine Sirikanda or Nick Mattison

Mattison Public Relations

Tel: 020 7645 3636


Publisher Contact Information:

Mattison Public Relations
+44 20 7645 3636
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