Hospitality leaders urge Chancellor to use tax relief to ‘save the industry’
A Dow Schofield Watts advisor is helping to lead a campaign calling on the Chancellor to use tax relief to encourage investors to support the hospitality industry through the pandemic and beyond.
Payam Keyghobadi has joined forces with Alan Lorrimer, founder of London’s live music venues The Piano Works, and lawyer Dave Roberts to write an open letter to Rishi Sunak proposing changes to the EIS and SEIS schemes to help struggling businesses attract fresh investment.
The letter, which is also signed by Kate Nicholls, CEO of UK Hospitality, and Michael Kill of the Night Time Industries Association, says their proposals would ensure that many bars, restaurants, pubs, clubs and music venues would have the necessary liquidity to survive and take advantage of the pent-up demand when the public return.
Payam, who advises many well-known bars, clubs and restaurant groups and who is based in Dow Schofield Watts’ London office, helped to draw up details of the changes. Under the proposals, which would last for 24 months, income tax relief would be increased to 75% from the current level of 30% for EIS and 50% for SEIS, with the increase offset by the removal of loss relief. The schemes would also be extended to allow larger and more established businesses to benefit and allow funds to be used for acquisitions or repayment of CBILS loans.
Government figures show that in the three years to April 2019, the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) helped 1,370 companies in the hospitality, arts and entertainment sectors to raise £428m.
Payam said: “Despite optimism about a vaccine, it is going to be a very difficult winter for the hospitality sector and many excellent operators will be forced out of the sector, never to return.
“Debt cannot be the only answer in the current circumstances. Our proposals would provide an equity option in addition to the current CBILS loans and would also be highly targeted as investors will only support those businesses with a strong chance of survival. These measures will enable many previously healthy businesses to attract investment to rebuild the sector and in turn to continue to contribute to employment and tax income.”
Alan Lorrimer adds: “Since March there has been no light at the end of the Covid tunnel, at last we have something to look forward to. We urge the government to allow these changes to the EIS scheme and help rebuild the hospitality industry which has been devastated and has left so many of our young people out of work.
“Whilst the government’s financial support has been needed and much appreciated, the level of debt is not sustainable. Currently the sector’s balance sheets are over leveraged with CBILS loans enabling operators to survive, but there are many at risk of liquidation. The amendments to this scheme, will help the hospitality industry help itself and replace Government debt with equity.
“We know the public will come flocking back to the venues they love so much as soon as they are able, and we want as many businesses as possible to still be around for the next roaring twenties.”
The group are proposing the following changes to the EIS and SEIS scheme for 24 months, after which time it would revert to current criteria and reliefs:
- Eligibility – increasing income tax relief at the point of investment to 75% (currently 30% for EIS and 50% for SEIS); offset by removal of loss relief.
- Age of business – extending the schemes to businesses established up to 12 years ago instead of up to 7 years as at present.
- Size of business – increasing the size of businesses which are eligible from under 250 employees to under 500 employees and from gross assets of less than £15m to £100m.
- Use of funds – allowing funds to be used for acquisitions and the repayment of CBILs loans.
- Investment limit– increasing the maximum threshold to £45m lifetime and to £15m in any one year (currently £12m and £5m respectively). The UK taxpayer’s capped investment of £1m per year would remain unchanged.
- Length of investment – shares to be held for a minimum of 4 years (instead of the current 3 years) to qualify for CGT relief, thus driving longer-term investor support.