Asian restaurant chain Tampopo has hit out at this summer’s changes to Enterprise Investment Scheme (EIS) legislation claiming they will inhibit the growth of small restaurant groups.

July saw a cap placed on the maximum sum an EIS can raise, down from £8m to £2m, and this month’s pre-Budget report increased taxation of investors seeking rebates through EIS investment due to the removal of taper relief on capital gains.

Tampopo claims it will now be hard to incentivise investors in its chain of four restaurants as the increase in capital gains tax – from a 10% starting point to a flat rate of 18% on disposals - nullifies the profits made through the tax relief EIS investment brings.

David Fox, co-founder of the Asian restaurant chain Tampopo, said: “The removal of taper relief in the recent budget statement will exacerbate the problem and will offer no incentive for venture capitalists to hold onto their investment.”

Fox added this would likely lead to rapid changes in ownership, which was the last thing the hospitality industry needed.

EIS have traditionally been sources of finance for small operators unable to raise funds through venture capital or stock market flotation. Hospitality operators, such as Loch Fyne, have used them to successfully grow from fledgling companies into UK-wide chains.

Fox was also critical of the new limit on businesses wishing to use an EIS of having no more than 50 employees.

“What is particularly galling, is that the only reason Tampopo is no longer eligible is that we employ people – how ludicrous is that?” Fox said. 

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By Christopher Walton

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