Great Point Investments has made its first media investment via its Ventures EIS (enterprise investment scheme) fund.
The move comes despite HM Revenue and Customs’ imposing tighter restrictions on media EIS investment two years ago.
The venture capital firm has invested in Brightlobe, a media start-up which focuses on games for children’s development. Great Point is targeting a 200% return for investors, exclusive of EIS tax relief.
Philip Hammond’s 2017 Budget put far more stringent requirements on EIS investments via the ‘risk-to-capital’ condition.
The new rules limited the scope of EIS media investment, mainly due to restrictions on the use of special purpose vehicles, pre-sales, and subcontracting.
Despite the new rules, Great Point says that it has seen many media companies receive Advance Assurance from HMRC.
The firm launched its new EIS product in Q4 2018 and is targeting investments in areas such as media content creation and production facilities, as well as new technology.
Dan Perkins, director of Great Point Investments told Wealth Manager: ‘The new rules aim to direct investment into entrepreneurial businesses seeking to innovate and disrupt, ensuring that investors prepared to take the risk are rewarded by potentially significant returns.
‘There are a great many businesses that meet this remit within the media sector and it is our intention to support as many of these as possible long into the future through our ventures EIS fund.’
Ingenious, which previously the largest EIS media investment manager, pulled its media EIS offer in February over concerns that its portfolio would not qualify for tax relief. Ingenious had invested over £800 million in EIS media investments since 1998.
According to Intelligent Partnership’s 2019 EIS Report, the amount of open EIS media offers dipped from 33% of the market in November 2017, to 24% a year later. There are currently only six EIS providers investing in media, representing 11.5% of the market.
EIS investments can qualify for 30% income tax relief up front, as well as capital gains tax relief and inheritance tax mitigation.
Perkins added: ‘HMRC’s concern post the patient capital review was not specifically with the media sector but anything that could be considered asset-backed in nature.
‘The new HMRC rules have been phased in over a period of time which has allowed the entire industry, across all sectors, to refocus capital to businesses targeting growth over the long-term, thus achieving HMRC’s main stated objective.’