Risk-free capital growth isn't easy to come by. How can Britain's higher-rate taxpayers and high net worth individuals (HNWIs) grow their savings without falling fould of the taxman? This week we've been reading of renewed interest in the Enterprise Investment Scheme (EIS).
Lifetime Allowance protection, and other restrictions on high earners and pension rules have limited the tax relief formerly available to help the working wealthy. Rebecca Williams, writing in CityAM, says the answer is to explore EIS and SEIS, and venture Capital Trusts (VCT) for "prudent investors [who] have used their ISA allowance and who are looking for a tax-efficient investment opportunity outside of pensions."
Rebecca is a and gives two useful worked examples for hypothetical clients, one seeking to reduce an income tax liability of £30,000, and one attempting to defer Capital Gains Tax (CGT). If these are difficulties you're lucky enough to have, take a look at her article.
Investing in small, unquoted companies - which is the purpose of EIS - is a tactic that appeals to investors who may may not fancy the difficulty of picking unlisted firms for their portfolio. They may be better off talking to firms that offer EIS model portfolios. The newest player in this field is GrowthInvest, who today launch their new discretionary managed portfolio service. The portfolios will be managed by Sapphire Capital Partners. CityWire carries an informative article, and a detailed press release in Adobe PDF format is available from GrowthInvest.
If youare interested to know what kinds of firms are looking for this kind of investment, the Manchester Evening News reported on Wednesday that the city's growing technology sector is actively seeking EIS investment. How can city attract enough investors to fuel its tech firms?
The article quotes local lawyer Ed Foulkes, a partner in the Manchester office o Clarke Willmott:
"Raising investment can be an exciting, but also a stressful, process. This particularly applies to tech companies given the breadth of the sector, as the umbrella term “tech” ranges from data to cloud to software to hardware, even including AI.
"Depending on the nature and stage of the business, these might be institutional lenders, private equity, venture capital, EIS funds, crowd funding platforms, angel investors or other tech companies looking to collaborate.
"There is an art to raising money and it’s never too early to get your advisers, including lawyers and accountants, on board. The keys to success when securing investments are due diligence, preparation (lots of it), and knowing the market well.
"Firstly, you’ll need to prepare an information memorandum – giving people an idea of your business, its finances, what amount you are looking to raise and whether that is in return for a slice of the equity or as a loan.
Also, ask what the investor can bring to the table besides cash."