The rules governing tax-efficient enterprise investment schemes (EISs) should be eased following the Brexit vote to boost investment in early-stage companies, the sector’s lobby group has told the government.

The Enterprise Investment Scheme Association said it can take up to 16 weeks for companies to gain “advance assurance” or approval from HM Revenue & Customs to qualify for raising funds under the scheme. Advance assurance is not mandatory, but most professional investors will not invest in unqualified firms.

“We need to try and avoid these delays in terms of gaining advance assurance,” said Mark Brownridge, EISA director-general. “Some of the larger [EIS providers] are champing at the bit to tell investors about the investments they have in their portfolios.”

The EIS was devised to reward investors willing to put their money into riskier early-stage companies: they can gain 30 per cent income tax relief on a maximum investment of £1m, pay no inheritance tax as long as the investments have been held for more than two years, and are exempt from capital gains tax after three.

Since the scheme was introduced in 1993, almost 23,000 companies have raised more than £12.2bn of funds, according to EISA. Last year, the Treasury moved to tighten rules governing both EISs and venture capital trusts, another tax-efficient vehicle, including banning investment into management buy-outs.

In a letter to Theresa May, Mr Brownridge and Howard Flight, EISA chairman, called on the prime minister to “improve SMEs’ access to funding via these schemes”.

“Lifting most or all of these restrictions would be a quick, simple and decisive step in the right direction to getting the UK economy performing, post-Brexit,” they wrote.

The Treasury said all tax policy was kept under review. “The vast majority of applications are handled within six to eight weeks, though more complex cases can take longer,” it added.

EIS investment is only permitted in companies that have been trading for fewer than seven years — or 10 if a company is deemed “knowledge intensive”. EISA is also asking for the extension or abolition of these time constraints.

Danny Cox, a chartered financial planner at Hargreaves Lansdown, said that while reducing bureaucracy was welcome, the schemes should retain their original aim of incentivising investors to risk funds on early-stage companies.

“Reducing the red tape and lead time to approve a scheme would be welcomed by all sides but it’s important that the industry does not lose sight of their purpose,” he said.

John Glencross, chief executive of Calculus Capital, which invests through EISs and VCTs in such diverse sectors as biotechnology and restaurants, said the lengthy process to gain accreditation was “the biggest obstacle in getting deals done”.

“Jobs are being, and will be, lost; which we can’t afford in the post-Brexit economy.”

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