Tax year end – or the end of days?

Andrew Sullivan on the ups and downs of TYE 2020

It seems a lifetime ago, but it was just at the beginning of April that I got in touch with some of our friends in the sector.

Lockdown was still a novelty and social distancing was beginning to be seriously observed with typical British awkwardness. Then the infection and mortality statistics started to make it terrifyingly clear that this wasn’t just something nasty that was going around; this was the biggest threat to human life in our country since the Blitz.

“I don’t suppose there’s ever been a TYE quite like it given the current circumstances”, I wrote (perhaps rather flippantly, I now realise). “For the next issue of GBI Magazine, I’m planning to have a look at the ups and downs of TYE 2020 and whether your experience this time round was startlingly different or amazingly similar to before.

“I’d also be interested to hear your opinions on the immediate and longer-term prospects for the sector.

“If it helps you avoid cabin fever, would you care to jot down a few thoughts?”

The response was fascinating and refreshingly positive…

Amersham Investment Management

SEIS and EIS investing in Q1 2020 was, like practically every other sphere of economic activity, severely impacted by the consequences of the Covid-19 pandemic. S/EIS investing has become in recent years less centred around the tax year-end, with closes arranged by investment managers in this sector throughout the year, for example in biannual or quarterly closings. Nonetheless, the tax year-end remains a significant hard deadline in the fiscal calendar by which many investors seek to ensure deployment of their allocated funds in order, especially, to benefit from the opportunity to “carry-back” their tax reliefs to the previous tax year, SEIS in particular remaining a specialist ‘passion-centred’ investment.

At the time of writing (April 2020) it is too early to infer any hard, detailed industry-wide assessment for S/EIS but anecdotally most managers known to this firm have had deployment plans affected quite seriously.

In our case we also found that expected inflows for deployment came under pressure, not to the extent that deployment was jeopardised but that additional criteria for investment had to be considered in investors’ best interests, as always.

First, we had to review our pipeline of investee companies which had already passed through due diligence process and initial investment committee review in order to assess, from the investor perspective, which companies would now be best able to safeguard the prospective follow-on investment. This was less complicated in the cases for EIS follow-on investments, as appropriate companies in our portfolio were already well known to us and effective information-rich communication with them was possible in the very short term.

For the pipeline of prospective new company SEIS investments this process was more challenging. Our decision was to increase concentration – meaning that instead of investing in three new prospects we chose just one. Normally we would look to provide a degree of sector diversification for any investment close. However, in these circumstances we felt it was not in investors’ best interest to be deployed into each of several companies which may risk being undercapitalised sufficiently to weather any likely pandemic-related storms. Accordingly, we chose to deploy into just one SEIS company, being the one which we were most confident could be best positioned to navigate successfully through the current environment.

That SEIS investment was completed on 3 April 2020 in Newfangled Games Limited. Newfangled is a premium mobile, PC and console game development studio based in London. Founded by BAFTA-winning developer Henry Hoffman and award-winning artist Frederick Hoffman, Newfangled develops original IP with a focus on artistic, narrative-driven, emotionally engaging game experiences. Henry is a BAFTA-anointed “Breakthrough Brit” who after leading on the Microsoft-published, BAFTA-winning game Mush, co-founded Mudvark and created the millionplus-downloaded game Mortar Melon. His follow-up game “Hue” won over 25 industry awards, successfully releasing on all current generation consoles and MAC/PC. Newfangled has been created to pursue a plan to create a studio producing a series of games titles. With necessary consents obtained from HMRC, the team was, by the turn of the year, ready to hit the ground running and start work on the first in this series of developments.

When current conditions made us consider which of several excellent SEIS propositions on our books to support at this incredibly difficult time, Newfangled were able to demonstrate an operating model wherein we have high confidence they can execute their plan with minimum disruption:

  • Home working is perfectly familiar in their sector
  • Their year 1 budget could be cash flow protected through cancellation of all travel to conferences
  • Staffing could be re-shaped in timing but not in reducing skills-sets available
  • The product is digital therefore no supply-chain problems relevant
  • The market environment is even more positive for entertainment

Our firm, focussed wholly on the S/EIS sector, will always seek to meet challenges and keep investing as subscribers have trusted us to do in their tax-advantaged allocations and of course we remain open, working remotely.


In some respects it remains too early to assess the true impact of the coronavirus pandemic on our industry, and to understand the effects it has had on fund managers, fundraising and distribution, and of course the health and longevity of investee companies across the UK.

The real impact on the overall tax year was only really seen in March, rather than any earlier, and so whilst we saw some impact on the usually busy last few weeks of the tax year, by that stage many of our advisers and clients had already made their tax-efficient investments. However, while we continued to see growth within our own business during the 2019-20 tax year end period, we are aware that fund managers across the market have struggled to raise and deploy assets, and it appears that figures are significantly down on the same period in the 2018-19 tax year. We are also conscious of the high number of start-up companies that have been forced to make drastic changes to their headcount and draw back their revenue-generating activities.

Looking at the wider economic climate, we are encouraged that the government has issued a support package specifically designed to support SMEs and their early-stage investors during this challenging time, although we agree with others across the industry that this is likely to need some further measures in order to be truly beneficial in getting support and capital to those who need it most.

Given the ever-changing nature of the situation we find ourselves in, we are continually assessing the operating environment and impact on growth for fund managers, entrepreneurs, financial advisers and their clients. Over the last four years we have helped drive positive change and digitalisation in the tax-efficient arena, so that now digital applications, signatures, sophisticated analytics tools and 24-hour access and support are becoming the norm. We are pleased to see that we have seen this welcomed and adopted by almost the entire industry. This gives us increased confidence that the industry can carry on with a version of ‘business as usual’ and potentially recover fairly quickly once a new version of normality returns.

While there will of course be numerous challenges for advisers and their clients at this difficult time, we remain optimistic about the strength of this sector in the longterm and its ability to weather the storm.

Haatch Ventures

As Haatch is a relatively new fund we were, in some ways, fortunately positioned to weather this current storm simply because we weren’t expecting a vast tsunami of tax year end EIS funds to land in order for us to meet our targets and drive our business forwards. We run our funds very much in the same way we expect our invested companies to be run – lean and prudently with 12 months plus of runway and agility to spare.

It’s because of this that we see the future more brightly than most and while the pandemic has certainly sharpened our focus on certain industries a little more than before our approach has changed little. We remain committed to investing in digital pioneers and disrupters at an early stage and we are certain that they will be well placed to grow throughout the coming recession.

The pipeline of new opportunities that are set to take advantage of the structural economic changes ahead remains strong and we remain excited to be supporting them with our usual hands-on approach. All four of our partners have built companies through the last Great Recession and so we are open-eyed to the challenges, but also to the opportunities it presents and we plan to take full advantage of them.

Our next Fund will open within the next few weeks and we welcome conversations with investors looking to find ways in which they can get their hard earned cash into an investment designed to not only weather this current economic storm, but take full advantage of it.

Par Equity

EIS subscriptions were up 94% year on year (£4.5m v £2.3m), though starting from a low base.

Investments from the Par Investor Network were down 18% year on year (£5m v £6.1m).

We estimate that between £0.5m and £1m additional subscriptions were lost as a result of C-19, but as all our investment opportunities were fully subscribed by the end of the tax year, this would have been used to invest in the new tax year.

We now have 4 separate sources of capital to invest in and support our new and existing portfolio companies. These are the Par EIS Fund, the Par Investor Network, the Scottish Investment Bank and just recently the new £75m investment programme with the British Business Bank. This positions us very well to take advantage of the increasing opportunities we are seeing in Scotland, Northern Ireland and the North of England.

Of course, some of our portfolio companies are hurting in the face of C-19, but others are capitalising on the opportunities that it brings. The majority are technology companies that are continuing to develop well and cut through the noise.

Overall, we are optimistic about the outlook for both our portfolio and fundraising.


First and foremost we are a technology company and our very DNA is within the tax efficient market. As such we were incredibly fortunate to be able to transition to the new normal and work from home without any business continuity issues. Working closely with fund managers, investors and advisers we felt keenly that the industry as a whole was not so fortunate; the timing of the pandemic could not have been worse for the tax year end investment cycle and we have been working hard with all sides of the market to ensure our digital market place, the CoInvestor platform, is able to deliver a solution in these extraordinary times.

As post rooms shut across the nation, we immediately organised a process with fund managers and their custodians implementing a digital straight through investment process on our regulated platform ensuring a seamless process for investing and managing these investments could be achieved. We believe we are first to market with this and we were really encouraged to work with all of the market in getting this live as quickly as we did.

Clearly all of our clients were impacted by COVID and we ourselves were not immune. With transactions on our platform down markedly from expectations this was keenly felt across the multiple fund managers and advisers we work with. However, we have a digital solution and this has accelerated adoption from all sides and the efficiencies we create by working together in a digital environment we believe will continue to be in place long after the lockdown is a distant memory.

Looking ahead we are also working with a high number of fund managers to list single company deals from their portfolios on the platform. Should these be at fair value then the ever-increasing number of HNW investors (and elected professional or sophisticated investors) using our platform will be able to invest in the funds themselves as well as support individual companies. We see this as an opportunity for all.

We are also encouraged by the accelerated process of the adoption of our digital services concerning portals, whether operating on the platform directly or as a standalone to service clients with a secure document room and communication channel. On our platform this is now free of charge for fund managers and adviser firms as we support them through this unique operating environment. Their interest in this is we think testament to the industry putting the client first, something we feel strongly will put us in good stead as we look forward to brighter times and not behind us.

Hardman & Co

One of the consequences of the current financial crisis is that it has become much more challenging to value many private companies, including those within EIS funds. The world has changed, stock markets are down, and funding has suddenly become less plentiful at a time when many businesses really need liquidity.

The ability to value many companies is particularly important to provide a ‘fair value’ assessment when undertaking a transaction or valuing portfolios.

When the market has momentum, investors often compete to invest in good private companies, and between them create a fair market value. In less buoyant times, as we are currently experiencing, investor confidence declines and less funding is forthcoming.

Without funding, many ambitious businesses find their once rosy future is replaced by fear for survival, particularly where cash flow is critical. Valuations can be impacted suddenly and dramatically. In short, for many companies it is necessary to recalibrate their worth. This is when the services of an independent valuer can be crucial.

Hardman & Co has been involved in private company valuations for several years. This includes significant experience in working for funds administrators helping to establish fair values for private companies held in dailypriced investment funds. Our expert team of analysts bring their knowledge of real-world circumstances to underpin the valuation computation derived from accepted industry practices and methodologies.

Hardman & Co is now bringing this expertise into the EIS market, to help ensure that there is fair value for investors, managers and the companies themselves.

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