I received a mailshot offering free entries into the National Lottery – is it a scam? As low interest uk forex tax free prevail and the Government continues to claw back the annual allowance on pensions, investors have been forced to find more creative ways of getting returns. For many, investing in venture capital trusts or an enterprise investment scheme could be the answer. VCTs and the EIS were introduced by the Government as a way of encouraging investment in start-up businesses in the UK.
But they also come with a major tax relief, making them an attractive option for serious and experienced investors. Additional benefits include tax-free dividends and tax-free capital gains on VCTs, and inheritance tax relief on enterprise investment schemes. Although VCTs and the EIS are high-risk, the tax breaks help to mitigate some of that, as well as the fact that all companies are required to go through HMRC. Mark Brownridge, director general for the EIS Association. Where have investors found bumper returns in the past year? Will there be a Budget crackdown on VCTs? Existing investors will have their eyes on the Budget on Wednesday, with the industry expecting some technical changes to the schemes.
EIS success stories include smoothie company Innocent and English wine maker Chapel Down. Bosses at members-only luxury travel company Secret Escapes put part of their success down to the investment secured through the VCT scheme. Launched in 2010, the firm now has offices in London, Berlin, Munich, Stockholm, Warsaw, New York and San Francisco, has more than 1. But with such investments also comes a high risk of failure. DVD mail order service provider Love Film, which closed its operations last month, is one such name to have enjoyed initial success from VCT funding but failed to maintain its momentum. It is these schemes that the Chancellor will target. To qualify for tax relief under EIS, investors must have held their shares for a minimum of three years.
Companies in VCTs also have a few years on their EIS counterparts, up to ten in some cases, and can include small unquoted businesses, firms in specialist sectors or companies listed on the smaller indices of the London Stock Exchange such as AIM. However, as VCTs and EIS are highly illiquid assets, Jason Hollands, managing director of business development at Tilney, stresses the importance of planning how you will cash out the investment. There is no market on which to sell your shares, so setting out a potential path for exit is essential. Looking at a company’s business plan before you invest will help to give you an idea of their strategy,’ he says. A bit of common sense needs to prevail when considering these schemes. They are not a replacement for pensions.