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Unlike the VCT, the EIS fund is not really a fund at all in the sense of being a discrete investment vehicle. Instead, it is a series of parallel investment mandates controlled by a fund manager – but this technicality is not important to the investor. Like VCTs these funds are generally marketed to the general public.

Despite having a flexible and attractive set of tax benefits, EIS funds have historically raised much less money than VCTs. However, over the past few years there has been increasing government commitment to EIS – reflected in improved tax benefits – and government disenchantment with VCTs – reflected in reduced tax benefits.

Taken together with the increased highest rate of income tax and sharp reductions of the amounts that can now be invested in SIPPs, the EIS has become more and more appealing. As a result EIS funds are now the tax advantaged vehicle of choice.

The amount raised by EIS funds overtook that raised by VCTs in the tax year 2007-8. The tax changes made by the coalition government since it came to power can only reinforce the trend.