Enterprise Investment Schemes – Latest UnaVida House View on Alternative Investments.
Enterprise Investment Scheme Investing has proved quite popular, with a 30% tax reduction against income tax – and many EIS schemes backed by assets, what’s not to like!
A series of changes to the qualification rules for EIS means that the EIS companies are struggling to find companies that fit the new criteria. That means that demand for EIS products could outstrip supply.
The rule changes also mean that EIS investors will have to embrace more risk as the Government has indicated that it wants EIS investment to go to new companies, trading in new companies can be more fraught.
We wonder however if demand will persist at previous levels, as quite apart from the new rule changes, there is ongoing frustration and annoyance at delays of the issue of the EIS3 certificates (to enable he investor to claim tax relief).
So although one has to hold an EIS ostensibly for 3 years, any non-trading period does not count, in many cases it will be at least 4-5 years before you are able to recover any capital from an EIS.
The frustration and annoyance (both for clients and professional advisers) is multiplied when dealing with EIS portfolio investments, as via an EIS portfolio of 18 different investments over time. An investor will have to wait for 18 different EIS3 forms to be able to claim his full tax rebate.
When one also takes into account that tax relief may have had to be claimed over three different tax years, then the professional time spent may exceed any small amount of adviser fees paid by an EIS company.
Before one rushes away from the EIS market place, it is worth remembering that with an EIS, one is able to :-
- Carry back one year and recover tax already paid.
- EIS has far higher maximum investment level than a VCT.
- EIS investment if held, will be exempt from IHT.
- You can hold over CGT with EIS.
If you are a high rate tax payer then it may be worthwhile considering pensions, EIS and VCT investment – do seek advice, to contact us CLICK HERE.