The number of approvals given for the funding of small businesses through the government's Enterprise Investment Scheme (EIS) has dropped, according to figures published by HMRC.
Of the 3,270 requests submitted by small and medium-sized enterprises (SMEs) in the 2018/19 tax year, HMRC approved 62%. This is down from the figure of 75% recorded in 2017/18.
The long-term average has seen approval rates of 85% of applications under the EIS scheme over the past ten years. The EIS allows private investors to take advantage of tax breaks on investments of up to £1 million per annum in small companies.
The scheme permits investors to reclaim 30% of the cost of investment against their income tax bill. It also makes certain capital gains tax (CGT) and inheritance tax (IHT) advantages available. Additionally, investors can claim further income tax relief should an investment result in any form of loss.
However, in recent years the EIS has been restricted, excluding businesses that have been trading for over seven years, as well as those backed by assets exceeding £15 million.
Gary Robins, Head of Business Development at private investor network Growthdeck, said: 'Expanding the EIS could ensure that small businesses secure the investment they need to continue to drive the UK economy forward post-Brexit.'