The London Chamber of Commerce and Industry (LCCI) recently asked us to contribute to their submission to the Tax Support for Entrepreneurs: Call for Evidence. A initiative aimed at helping the government better understand the effectiveness of tax reliefs for investors.
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“This Call for Evidence seeks your views on what works, what doesn’t, and how we can make improvements. We want to hear from founders, investors, trade bodies, and all those with a stake in the UK’s entrepreneurial future.”
The HM Treasury launched the Tax Support for Entrepreneurs: Call for Evidence late last year.
The aim was to gather evidence from entrepreneurs, investors, and professional advisers on the effectiveness and accessibility of existing tax reliefs, such as the Enterprise Investment Scheme (EIS), Seed EIS (SEIS), Venture Capital Trusts (VCT), and Business Asset Disposal Relief (BADR).
As well as how the UK can better support these companies to start, scale and stay in the UK.
The London Chamber of Commerce and Industry (LCCI) asked us to contribute to their response. Given our network of fractional Finance Directors and CFOs working inside early-stage and scaling businesses, we were in a strong position to share what is happening on the ground.
We reached out to our portfolio FDs and CFOs for their views. The responses were clear and largely unanimous. Here are some of the key themes that emerged...
EIS and VCT are government-backed schemes designed to encourage investment in small businesses by offering significant tax incentives to investors. Our CFOs claim these programmes remain essential for early-stage investment in the UK.
They consistently told us that the tax reliefs play a significant role in attracting investors to higher-risk businesses. Upfront income tax relief, tax-free gains and loss relief mean investors are more comfortable backing early-stage companies. That has two major effects:
“EIS has been a great tool to raise funding, and mitigate risks for investors.” Alpesh Malde, Fractional CFO
For many young companies, that capital arrives at the exact moment it’s needed, when the business is still proving its model and access to other funding sources is limited.
Recent changes coming into effect in April 2026 increase eligibility thresholds.
Companies will be able to have up to £30m in gross assets pre-investment and £35m post-investment, and raise £10m per year or £24m lifetime.
This is seen as a positive step, however the seven-year limit means businesses can fall outside eligibility just as they reach a major scaling phase.
The seven-year limit is a rule designed to ensure that state-backed tax reliefs are used for early-stage companies, which states a company must receive its first investment within 7 years of its first sale.
“You can be scaling fast and suddenly you’re out.” Thomas Addy, Fractional CFO
Several of our CFOs suggested extending this window or allowing it to reset when businesses raise a genuine scale round.
The Enterprise Management Incentive (EMI) remains one of the most powerful tools for attracting and retaining talent without significant upfront cash costs.
Designed for small, private UK companies, EMI is a scheme that allows businesses to grant employees the right to buy company shares at a fixed price in the future. Plus, avoid standard income tax charges on the growth of the share value.
“EMI is one of the best tools there is to attract and keep talent when cash is tight.” Thomas Addy, Fractional CFO
However, the scheme has not evolved in line with the scale-up ecosystem.
The £250,000 individual limit has remained unchanged since 2012, and eligibility criteria often exclude companies just as they begin to grow.
There are also operational issues. Founders can face tax implications when implementing the scheme and the process can be time consuming for smaller businesses.
Our CFOs suggested some improvements:
One theme repeated across almost every response from our CFOs was that uncertainty discourages risk-taking.
Entrepreneurs rarely start businesses because the tax environment is attractive, but it’s important they understand the rules their business must operate within. Frequent changes, shifting thresholds and unclear guidance makes this difficult.
“If you are making a growth or investment plan, you need to know the conditions you are working under. If these change at the whim of government, plans get shelved.” Jeremy Wilson, Fractional Finance Director
This is particularly relevant for SMEs, where financial resilience is thinner. When the tax ecosystem is so often in a state of flux, businesses tend to preserve cash reserves instead of investing.
Another point raised repeatedly was how threshold changes influence business behaviour.
When tax bands or reliefs change abruptly at certain levels, companies sometimes delay hiring, investment or expansion to avoid crossing them.
From a policy perspective, this can produce the opposite of the intended effect.
“Firms will delay growth, hiring and investment to avoid crossing tax thresholds, which can distort otherwise sound commercial decisions.” John Lavendar, Fractional Finance Director
Gradual transitions and stable rules would encourage more natural growth.
Many successful founders want to reinvest in the next generation of companies. The UK has historically benefited from this cycle.
Capital Gains Tax levels and reinvestment reliefs directly affect how much capital founders have available after an exit. Stronger rollover or deferral mechanisms could significantly increase reinvestment into start-ups and scale-ups.
Stability is equally important. Frequent policy changes can push capital towards lower-risk or international opportunities.
“Founders reinvest when it’s simple, predictable, and they’re not hit with avoidable tax friction.” Thomas Addy, Fractional CFO
Across all responses, one message kept coming up - entrepreneurs do not need a perfect tax system, they need a predictable one.
Stable reliefs, clear rules and manageable compliance requirements would go a long way toward encouraging founders to invest, hire and scale businesses in the UK.
“Keep rules steady for a few years and cut the admin. Entrepreneurs will back the UK if it feels predictable.” Thomas Addy, Fractional CFO
The purpose of the Tax Support for Entrepreneurs Call for Evidence is to ensure the UK remains a competitive place to build and scale companies.
Through our network CFOs and FDs, Ferrock sees the real financial decisions founders face every day. Feeding those experiences into policy discussions is an important way to ensure that tax policy reflects the realities of running and growing businesses.
If the government’s goal is to encourage entrepreneurship, the message from our CFO network is clear. Keep the incentives, reduce friction and above all, provide certainty.
Key Takeaway
While UK tax reliefs such as EIS, VCT and EMI remain essential tools for attracting early-stage investment and talent, their impact is being limited by complexity, outdated thresholds and, most critically, a lack of stability. The consistent message from Ferrock's CFOs is that uncertainty in tax policy is actively holding businesses back, delaying hiring, investment and scaling decisions.
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