Our Investment Techsperts, Ali Wilson and Grant Callaghan raised some thought provoking points in their “Tax-Advantaged Investments – A Real Wrap Battle” webinar this morning regarding EIS, SEIS, VCTs and Business Relief…

The polarising pandemic

Looking at the current state of this market, it has been observed that any VCTs that are brought to market almost immediately close to new investment or further contribution as they have reached their funding goals. This indicates that there is a lot of pent-up demand!

Ali suggested that this may be an indicator of the polar differences that have occurred due to the ongoing pandemic – there have been people who have not fared well, they may have lost their jobs, or struggled with money. On the flipside there are those individuals that have done well – saving money from commuting by having to work from home, not taking regular holidays and in general not spending as much as they normally would now have ‘spare money’ and are looking for decent investment returns.

Business Relief – IHT relief is not guaranteed until after death.

An often overlooked factor with these types of investments, where the IHT relief is in no way guaranteed. A promoter’s track record of historic, successful business relief claims is important here.

Tax advantages cannot be the main reason that these types of investment are recommended for your client.

An example given was a high earner who had an investment objective of helping new businesses that would have benefit in the UK in either energy or biotech. They would become an ‘angel investor’ for these types of business via an EIS or SEIS – meaning there is a specific reason for utilising this type of strategy aside from just tax efficiency.

The importance of research for better outcomes for your clients.

There are so many options on the market it is hard to narrow them down via a certain set of criteria. You should research into the provider / promotor to ensure you have a fuller picture of each product. Some points to consider:

  • Is there transparency in responses to queries? Is anything be glossed over, such as focussing on big wins and avoiding discussion of recent losses?
  • Have there been any client complaints or legal challenges?
  • Does what they say they will do match up to what is actually done? Would it stand up to legal scrutiny?
  • Is it a generalist or specialist product? Specialist products can fail at the HMRC hurdle.
  • Look into the track record or the provider. Obviously past performance does not give an indication of future performance, but it is important to consider.
  • Consider the experience of both the provider and fund management team.

There are many different considerations when it comes to using tax-advantaged investments. If you want to chat about any of the above, or have any questions about investment in general, just book a chat with our team here, or catch up on the webinar here.