Our response to the patient capital review

Earlier this month, we responded to HM Treasury's 'Financing Growth in Innovative Firms' consultation, which forms part of the Government's Patient Capital Review. Over the long-term, this exercise aims to improve access to capital for innovative firms.

The review cuts across a wide array of themes, and the Treasury consulted on the strengths and weaknesses of the existing investment ecosystem, the barriers holding back an effective supply of patient capital, and whether existing tax measures are cost effective.

Our response highlighted the vibrancy of the industry, and the crucial role played by EIS and SEIS in supporting the investment of patient capital.

We also suggested a number of improvements that could be made in future.

These were on made on the basis of our views that:

1. The prospectus regime imposes relatively high preparation costs on firms, and the €5m investment threshold limits the number of offers in the £4m-£10m range that are circulated to the wider public.
2. Considerable delays are being experienced in sourcing HMRC advanced assurance in relation to EIS and SEIS investments. Timely assurance is crucial to the effective deployment of patient capital through these schemes.
3. While the investment limit for Social Investment Tax Relief has been raised, the amount is still deemed to be too small to attract more ‘major’ investors. 
4. The review appears to underestimate the positive economic effects of existing tax reliefs such as EIS and SEIS. These have been vital to the development of today's investment ecosystem and should remain stable to inspire investor confidence.
5. A regulatory carve-out for low level investment intermediation activity undertaken by the universities and their Technology Transfer Offices would be enable such institutions to be more proactive in sourcing investment. 

Our team will be following the progress and outcomes of the consultation closely, and look forward to discussing its impact with clients and industry partners.