Rainmakers speaker from tech incubator welcomes Treasury u-turn on Angel eligibility

Claire Lewis chief executive, Baltic Ventures

Angel investors have welcomed a reversal of policy, largely buried in Jeremy Hunt’s Budget document on Wednesday (6 March 2024), that clarifies the qualifying criteria for high-net-worth individuals and self-certified sophisticated investors.

In the statement the government said: “The government will also legislate to reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor, and will also carry out further work to review the scope of the exemptions.”

Effectively this means the previous eligibility criteria will be reinstated with the legislation coming into effect on 27th March 2024.

Claire Lewis, chief executive of Baltic Ventures, who will be appearing at the Rainmakers conference to speak about the northern tech ecosystem on 20 March, said: “There has been a lot of concern in the founder and angel community, particular amongst those who have been working hard to improve diversity and investment outcomes for under-represented founder groups, particularly female founders, since the rules for HNWI and Sophisticated Investors changed at the end of January.” 

On 31 January, the Treasury raised thresholds for High Net Worth and Sophisticated Investor exemptions under the Financial Promotion Order. These changes raised the income threshold used to define high net-worth individuals from £100k to £170k and removed key criteria used to qualify as a Sophisticated Investor. 

In doing so, the Government significantly reduced the pool of those able to invest in early stage start-ups and this particularly hit women investors, other underrepresented angels and those based outside of London and the South East.

Lewis had been part of efforts on behalf of female founders who persuaded the government to think again. 

She added: “Following something of an outcry from female angel investors and founders, and an open letter from the Start-up Coalition and UKBAA, there have been extensive discussions with the Treasury, who have listened to the feedback. It is heartening that here is an instance where the government has listened, worked with and responded to criticism and feedback from the business community on new legislation and taken quick action to resolve things. A glimmer of hope for effective government…..”

Sam McArthur, partner at Praetura Investments in Manchester agreed and said: “These groups are dynamic backers of early-stage, high potential businesses, and it’s crucial they’re empowered to support our small business ecosystem.

However, consistent with much of the commentary around the Budget he said: “There’s still work to be done to address inequality of funding between the North and the South. Our own research revealed there’s an annual funding gap of £9bn for Northern based small businesses seeking funding for growth. More measures and initiatives to lower the barriers for firms raising capital will only support economic growth.”

Nicholas Hyett, Investment Manager at Wealth Club, a non-advisory broker of tax efficient investments such as VCTs, EIS and Inheritance Tax Portfolios also welcomed the reverse, but remained concerned the government had only agreed to a review: “With angel investing changing substantially since the current criteria were originally introduced, some future changes would not be a surprise. Any changes need careful consultation and a joined-up approach across government if they’re going to deliver the intended benefits without unintended consequences.”

The Enterprise Investment Scheme Association (EISA), the official trade body for the Enterprise Investment Scheme (EIS), said the move signifies a renewed commitment from the government to support early-stage businesses and foster innovation. “This is seen as a positive step towards the continued growth of angel investors, including women, across the UK alongside the British Business Bank’s regional angels programme which works to close the regional equity gap.”


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