Start up investment opportunities are limited despite new tax incentives, according to press reports

Interest has "cooled" in the Seed Enterprise Investment Scheme (SEIS), which offers generous incentives to qualifying investors in newly-developed or developing small businesses, according to the Daily Telegraph.

"We've had an odd experience of SEIS," venture capitalist David Watt of Oxford Capital told the newspaper. "Everyone got very excited by the tax reliefs on offer at first but enquiries have died off. Finding the companies is proving too difficult. We've had lots of private bankers expressing an interest in it for their clients but then they can't find the opportunities."

Entrepreneurs also found the scheme investment limit of £150,000 per company "too small", according to the paper.

The SEIS allows qualifying investors to claim income tax relief worth 50% of the cost of buying shares in a company, which has to have fewer than 25 employees and assets worth no more than £200,000. Although it will not become law until the Finance Bill 2012 receives Royal Assent, it applies in respect of shares issued on or after 6 April 2012.

Investors can claim the 50% relief on annual amounts of investment up to £100,000, provided that they hold less than a 30% stake in the company. They must also meet certain other criteria including not being an employee of the business, although directors are expect from this rule. Companies can offer investment opportunities covered by the scheme worth up to £150,000.

Qualifying investors are also exempt from paying capital gains tax (CGT) on gains on shares within the scope of the scheme, and will also be exempt from CGT for the year 2012-13 where they reinvest any gains made from the disposal of other shares where those gains are reinvested through the SEIS.

Tax law expert Chris Thomas of Pinsent Masons, the law firm behind Out-Law.com, said that he was unsurprised by the limited take-up of the relief to date.

"Whilst the scope of the relief is generous, the £100,000 cap on individual investments and the £150,000 limit for each company is really quite limited," he said. "When taken together with the other restrictions around the relief and the qualifying conditions that the company has to meet, the pool of suitable companies and interested investors was always likely to be small. Consequently, whilst this is undoubtedly a valuable relief in the right circumstances, it is unlikely to do much to plug the funding gap."

Under the current Enterprise Investment Scheme (EIS), tax relief is available at a rate of 30% on investment worth up to £10 million. Investors can also obtain income tax and capital gains tax benefits by buying shares in Venture Capital Trusts (VCT) - companies listed on the London Stock Exchange that are run by fund managers, who are often members of larger investment groups.

Earlier this month the University of Cambridge became the first university to launch its own SEIS fund, aimed at encouraging investors to fund young companies "spun out" from the University's research and enterprise divisions. Cambridge, which has been successful in using the EIS to leverage investment, has raised more than £800 million in funding for its portfolio of 68 companies since 1995.