All Posts By

Phil Teale

EIS Case Study: Plastic Green Power, “Long-term energy management…”

By | EIS Investments

At Bure Valley Group, it is an immense privilege to be able to work alongside some of the UK’s most exciting, world-changing startups. One of these projects within our exclusive investor network is Plastic Green Power; a dynamic renewable energy business which is seeking to address the UK’s reliance on coal, replacing this with a range of new technologies.

The UK has publicly committed to eliminate the country’s reliance on coal by 2024 and phase out current nuclear power plants. The result of these efforts has been a lowering of capacity in base-load power generation, which is set to exacerbate as decommissioning of older power plants continues over the coming years.

This problem is made worse by efforts to move to renewable energy sources like solar and wind, which pose problems of irregular electricity supply due to variable output. The good news is, a range of technologies can be brought to bear to address these problems in a circular, profitable way…

 

A bit of background

Incorporated in July 2019, Plastic Green Power is based in London and operates as a consultancy in the field of renewable energy. It exists to draw commercial gain from the UK’s energy markets, whilst making a positive contribution to environmental sustainability.

With their specialisation in renewables and wealth of experience in the industry, PGP is poised to find, assess and develop favourable opportunities. Leveraging relationships with technical engineers, landowners and energy providers across the UK also positions PGP to engage in efficient, sustainable and subsequent energy trading which provides a return for investors.

 

The opportunity ahead

Gas Peaking Plants provide power to the UK in times of peak demand and prices. The main problem is that they run on natural gas or CH4. However, technologies now exist which can reconstitute plastic into useful gases and oils.

The gaseous products include hydrogen, which can be sold as a fuel or burned to create electricity while synthesis gas (syngas / green-gas) can also be burnt as a fuel. The idea, therefore, is to combine the technologies: plastic gasification to create green-gas, and utilise the green-gas to run gas peakers.

The opportunity in the marketplace is considerable. Not only is there pervasive plastic waste to leverage, but local councils can also be approached for a gate fee. This means they could be sold electricity and conceivably, one day, hydrogen.

 

Seed / Enterprise Investment Scheme (S/EIS)

Plastic Green Power Ltd should be eligible for SEIS (first £150,000) then EIS very soon. These applications will be processed accordingly, once trading is formally established.

The company’s initial funding round is already part-funded, but the company requires additional funding to:

  • Finalise technology combinations and overarching process
  • Identify new and existing sites for development and/or commissioned sale.
  • Consult on early-stage development of land assets to Reading To Build status (RTB).
  • Facilitate the sale of acquired or self-developed assets.
  • Achieve funding down the line for construction of PGP’s plant.

 

Do EIS shares qualify for BPR (business property relief)?

By | EIS Investments

Business property relief (also known simply as BPR or as “business relief”) was introduced by the UK government in 1976, to incentivise people to invest towards certain types of businesses.

The primary relief on offer concerns inheritance tax. As a general principle, if you purchase shares in a qualifying company and hold them for at least two years, then these shares can be passed on to your beneficiaries free of inheritance tax (IHT) when you die.

More experienced investors might have noticed that this sounds very similar to the Enterprise Investment Scheme (EIS), which also allows you to pass on EIS shares to beneficiaries, free of IHT, provided they are held for at least two years. This naturally raises the question: 

Do EIS shares also qualify for the tax reliefs available under BPR; can the benefits of both be combined in some way, to benefit the investor?

To answer this question, we need to explain BPR and EIS in a bit more detail, so it is clearer to see how they relate to each other. Please note that this content is for information purposes only, and should not be taken as investment advice. The value of your EIS investment or BPR investment may go up or down over time, and you may get back less than you invested.

 

Business Property Relief

BPR is primarily concerned with incentivising investors based primarily by offering IHT relief. As mentioned, the scheme is over 40 years old and is a well-established scheme leveraged for estate planning purposes. However, the application of BPR varies from person to person, based on individual circumstances, as tax rules might change in the future.

Not all businesses are eligible to receive BPR status. Generally speaking, the sorts of conditions which might qualify a set of shares for BPR include the following:

  • Shares in certain companies which are listed on an AIM (alternative investment market).
  • Shares in certain companies which are not listed on a main stock exchange.
  • You hold partnership in a qualifying business.

Different rates of business property relief are available to an investor, depending on the situation. For instance, it might be that you are entitled to 50% BPR on quoted shares which give you control of a company. On the other hand, you might get 100% BPR on unquoted securities which give you control of a company.

Certain businesses or activities are likely to exclude a business from BPR. For example:

  •  Businesses which only generate investment income (e.g. commercial property letting).
  • A business which “wholly or mainly” in securities, land or buildings.
  • A business which is not-for-profit (i.e. it is not maintained on a commercial basis).
  • A business which is being closed.

 

Enterprise Investment Scheme

Generally speaking, if a company qualifies for the Enterprise Investment Scheme (EIS) then it is likely to also qualify for business property relief. 

As mentioned elsewhere in our articles on our Bure Valley Group website, EIS offers many other attractive benefits to investors in addition to IHT relief:

  • You can claim back up to 30% of your EIS investment from your Income Tax bill.
  • Any capital gains you make on your EIS shares are exempt from Capital Gains Tax (CGT) provided you hold your shares for at least three years.
  • If the EIS company fails then you can claim loss relief. The amount you get is determined by your investment value, multiplied by your highest Income Tax bracket.

These additional investor benefits render qualification for EIS status much harder for a company, compared to BPR. The rules are stricter for the former, so qualifying for EIS automatically makes a business eligible for the latter.

The generous benefits on offer to investors under EIS available to investors who are prepared to take on more investment risk, and who are focused on investment growth. For those who are primarily concerned with wealth preservation and reducing their IHT liability, then it is probably worthwhile consulting a financial adviser about the full range of options available to you. 

 

EIS & BPR

Although we are not financial advisers here at Bure Valley Group, it is worth pointing out some common ways EIS and BPR are combined by these professionals. Sometimes, an investor might have surplus investable assets and so an EIS can be leveraged to reduce their Income Tax liability. The remaining assets might be put into BPR products to reduce IHT exposure.

Another popular approach is for a financial adviser to move a client’s EIS investment into a BPR product, once they have exited the EIS. This allows them to potentially retain the asset’s IHT exemption without needing to commit to a further two-year minimum holding period.

 

Final Thoughts

As you can see, there are some similarities between BPR and EIS, primarily in the domain of IHT relief. Sometimes they are used together for estate planning purposes. Beyond that, however, EIS offers a much wider range of investor benefits in the form of relief on capital gains, income tax and more.

Here at Bure Valley Group, we operate an exclusive network which joins successful, experienced EIS investors with innovative and exciting EIS projects which need funding. If you are interested in joining our network or finding out more, then we invite you to get in touch to discuss your EIS options with our team. Contact us via:

+44 160 334 0827

[email protected]

Can SEIS relief be carried back or forward?

By | SEIS Investments

The Seed Enterprise Investment Scheme (SEIS) was introduced by the UK government in April 2012, to encourage investors to commit funding to UK startups by offering attractive tax reliefs.

For investors, here is a recap of some of the benefits of making a SEIS investment:

  • You can claim tax relief on up to £100,000 of SEIS investments per tax year.
  • You could claim up to 50% Income Tax relief on the value of your investments.
  • Earnings from your SEIS shares are potentially exempt from Capital Gains Tax (CGT).
  • If you reinvest profits of SEIS shares back into the SEIS they are exempt from CGT.
  • You can claim loss relief if the SEIS company fails at any point.

This can all sound very attractive to potential SEIS investors. One question many people have, however, is whether SEIS can be carried back or forward when filling out their tax returns. 

In this short guide, our team here at Bure Valley Group will be answering those and other questions. Please note that this content is for information purposes only. It does not constitute financial advice or investment advice.

The value of your SEIS investment might go up or down over time, and you might not get back the amount that you originally invested.

 

Can you carry back SEIS relief?

As mentioned above, you can claim back 50% of your SEIS investment against your Income Tax bill within a tax year. So, if you invested the full £100,000 into a SEIS-qualified company you could claim back £50,000 in Income Tax relief.

The good news is, you can carry back this SEIS relief to the immediate tax year preceding your SEIS investment. This assumes, of course, that you have not exceeded your SEIS relief limit for this previous tax year. 

Please note, however, that the SEIS relief is available as a reduction on your liability to Income Tax. So, if the relief is more than your tax relief for the previous tax year, for example, then this SEIS is effectively frittered away.

For instance, suppose your Income tax for the previous tax year was £40,000. However, suppose you also made a £100,000 SEIS investment which you failed to claim Income Tax relief on. In this situation, you could potentially claim back £50,000 in Income Tax from the previous tax year. However, since your Income Tax was £40,000, this means you would have missed out on £10,000 in available SEIS relief.

Another important thing to note is that in 2019-20, SEIS shares must be held by the investor for a minimum period otherwise the SEIS relief will be taken away. Typically, this period is at least three years from the date the SEIS shares were issued. 

 

Can you carry forward SEIS relief?

The answer to this question is very simple. In 2019-20, the answer is no. It is not possible to carry forward SEIS relief via a tax return or other means.

 

Qualifications to be a SEIS investor

If you are interested in investing in SEIS-qualifying companies to take advantage of the attractive tax reliefs available (including SEIS carry back), then you must meet conditions such as the following in 2019-20:

  • You must be a UK taxpayer and resident in the UK.
  • You must be at least 18 years old.
  • You cannot be connected to the SEIS company in question (e.g. if your interest in the business is judged to exceed 30%).

One important thing to note is the limit on SEIS funding that a company is allowed to receive. In 2019-20, the rules state that the company cannot gain more than £150,000 of SEIS investment within three years. So, if you’re interested in investing in a particular SEIS company make sure that it has not already used up its allowance in this respect.

If you are at all uncertain about whether or not you meet the conditions to become a SEIS investor, then we recommend you consult a professional tax adviser.

 

Conditions for “eligible SEIS shares”

You’ll notice that the SEIS tax reliefs available to investors hinge heavily on whether or not a SEIS investors’ shares are deemed to be “eligible.” Here are some of the conditions in 2019-20:

  • The shares must be “new”.
  • These shares need to have been fully paid for, in cash.
  • The shares must come with no special conditions attached to them; they must be “ordinary.”

 

Companies which can qualify for SEIS

Not all businesses are allowed to apply for SEIS funding or claim SEIS status. There are certain conditions which they must meet, including:

  • The company must have been trading for no longer than 2 years.
  • The company must not be listed on a recognised stock exchange.
  • It cannot be a subsidiary or controlled by another business.
  • The company must have a permanent address in the UK.
  • The company must not be engaged in “excluded activities” (e.g. steel production).
  • The company must employ fewer than 25 people.
  • The company must not own more than £200,000 in gross assets.

 

Interested?

If you are an investor or business owner seeking funding and you are interested in SEIS, then we invite you to join our network. Here at Bure Valley Group, we operate an innovative and exclusive network of SEIS investors and projects, enabling investors and business owners to find mutually-beneficial opportunities to grow their portfolio or business. 

Get in touch today to find out more about our exclusive SEIS projects, or to inquire about how we can assist you with the application process for SEIS funding:

+44 160 334 0827

[email protected]

EIS Case Study: Agri Tech, a transformative farming innovation

By | EIS Investments

In this month’s edition, we at Bure Valley Group are proud to announce our partnership with Agri Tech; a dynamic, innovative new startup which is bound to interest EIS investors. Agri Tech is leading the way in the global revolution in “modern farming techniques”, offering new ways to deliver sustainable farming solutions and food sources to the globe’s increasing population.

The company does this in a highly-efficient and environmentally-friendly way, namely via “vertical farming”. Here, Agri Tech provides the technology to enable nutritious plants to be grown indoors even in highly urbanised areas. Not only does this leverage greater use of space in modern farming techniques, but it also contributes to public health by helping plants to grow in “pesticide-free and disease-free conditions”.

 

A bit of background

IAG has a clear objective to “raise awareness and find solutions to the challenges faced by the agricultural sector”. It is no secret that the world’s growing population in the coming decades is likely to struggle with sustainable food supplies, without pioneering new agricultural technology. By 2050, for instance, it is estimated that the current population of 7.7bn will grow to 9.8bn. Demand for food, moreover, is likely to be 60% greater than it is today.

Moreover, globally, agriculture occupies 50% of the world’s entire habitable land and consumes 70% of the planets accessible freshwater, contributing to 11-15% of global greenhouse gas emissions. In IAG’s opinion, the ability to produce more food with fewer resources is a challenge that is posed to all nations and simply cannot be addressed without combined efforts.

IAG believes that through the implementation of novel techniques, combined with an arsenal of technological innovations” it can contribute to “delivering positive outcomes to environments, ecosystems and promise food security.

 

How it works

IAG is pioneering the utilisation of indoor farming technology with vertical aeroponics technology for commercial use within the UK. Indoor farming allows for the production of up to ten times more crop than regular farming per square foot. This is due to the vertical direction of most indoor farms, meaning that produce can grow on multiple levels per square foot of space.

This approach allows organic crop to become more accessible. In traditional farming, chemical pesticides are commonly used when environmental factors aren’t beneficial for the crops. Indoor farming means that these pesticides are not required, making it far easier to produce certified organic crops.

 

The opportunity ahead

No other company is currently using aeroponics with vertical farming; a gap in the market IAG believes it can fill to enable the growth of a new type of urban farming in Britain.

There are two main revenues from the development and implementation of its technology into “intelligent farming”: supermarkets (the primary target revenue steam) and retail of technology (i.e. to potential agricultural businesses worldwide for a profit).

Strategic alliances have already been forged with leading organisations such as Co-Alliance (one of the largest agribusinesses within the Midwest region in the US, with multi-billion dollar turnover). The State of Indiana alone has over 56,000 private farming operations, most of which will be attracted to Agri Tech’s value proposition due to the likely pressures of falling produce and crop yields (due to rising temperatures and volatile precipitation).

IAG has also had several interested partners in Europe seeking to invest in agri-tech. An example of this was a Milan-based real estate developer seeking to re-energise derelict warehouses within the city into an income revenue. They want to do this by supplying multiple local businesses with produce fresh supply; an imperative part of the Italian cuisine. Agri Tech has a fully designed proposal for this interested company.

 

Use of Proceeds

The use of proceeds will be used to transform the Berkshire facility into a fully automated indoor vertical farm, which will produce, in the Company’s opinion, premium produce.

The main purpose of the indoor vertical farm will be to grow premium produce. The secondary usage will be to showcase IAG’s end-to-end indoor agri-tech solutions to potential agricultural businesses worldwide for a profit.

Given the high-tech method, IAG will be utilising within the facility, the Company estimates the construction and acquisition costs will be up to £1million. Operational, transportation and general business overheads costs will be up to £2 million. The indoor vertical farming technology costs will be up to £2 million.

 

Find out more

Are you an investor interested in finding out more about Agri Tech? If so, then fill out the form below to request the full Investment Memorandum from Bure Valley Group.

 

How Do I Claim EIS Tax Relief?

By | EIS Investments

The Enterprise Investment Scheme (EIS) is attractive to many investors due to the compelling tax reliefs on offer, including:

  • Claiming up to 30% of the value of your investment via Income Tax relief.
  • Claiming tax relief on capital gains from EIS shares held for at least 3 years.
  • Claiming loss relief on the value of your original EIS investment, equivalent to the highest rate of Income Tax which you are paying.
  • Claiming inheritance tax relief on EIS shares held for at least 2 years.

However, many EIS investors do not necessarily know how to go about claiming this tax relief. What’s the process? Which forms do I need, and how long does everything take to complete?

In this guide, we’ll be providing a brief overview of the typical steps you need to be aware of as an EIS investor. Please note that this content is for information and inspiration purposes only. It is not a comprehensive guide and should not be taken as investment advice, financial advice or tax advice.

 

How to Claim EIS Tax Relief

Claiming EIS tax relief normally happens at the time when you start filling out your tax return for the concluding financial year. During this process, you should be asked to provide information which should have been supplied to you on your EIS3 Certificates. (This paperwork should have been prepared for you by the EIS companies you have invested in, including their signature following the certificate’s acceptance by HMRC).

Bear in mind that if you have invested into a fund, then you should have received prepared EIS3 forms from each of the companies contained within the fund. Bear in mind, however, that there is an exception when it comes to Approved EIS Funds which you have invested in. Here, the fund manager should instead supply you with one form – i.e. an EIS5 Certificate.

Regardless of whether you have an EIS5 certificate or a selection of EIS3 certificates, the documents broadly contain the same kind of information:

  • The name and reference of the HMRC office dealing with the certificate.
  • The EIS company name and the date on which your shares were issued.
  • The amount you invested into the EIS company (and upon which you can claim tax relief).

The next steps vary depending on how you tend to complete your tax return (i.e. online or via post). One exception to this submission process concerns the situation where you want to claim tax relief on a different tax year to the present one.

When you fill out a physical tax return, the relevant section regarding EIS tax reliefs can be found under the SA101 form (Additional Information). If you fill out your tax return online, however, then you will need to find Section 3 (“Tailor your return”). In these sections, you will need to enter the information from your EIS3/EIS5 certificates.

 

Important Information

Bear in mind that you must have held your EIS shares for at least 3 years before you can claim Income Tax relief. If you sell them before the 3 years are up, then you will need to tell HMRC and also repay any tax relief you have claimed on the EIS shares.

It’s important that there is a clear line of communication between you and the EIS company or fund which you are invested in. Ultimately, it is up to them to be organised and get the EIS3 / EIS5 certificate to you in good time, before you submit your tax return. It should be in their interests to do this for you, however, as they will want to keep you on as an investor.

Do remember that an EIS company will be unable to send the EIS3 form to you until they have traded for at least 4 months. However, you are able to make a claim on your tax relief on EIS investments up to 5 years old.

When you do get your EIS3 certificate from the company in question, it’s a good idea to consider to tear off the first page and keep it for your records. Bear in mind that HMRC might well ask you to reveal your EIS3 certificate after you have made your tax relief claim.

If your address has changed from the one displayed on the certificate, make sure you include a cover letter with your new address information on it.

If you are claiming loss relief on an EIS investment, then this does not need to be reported immediately on your tax return. You are able to claim up to 4 years at the end of the tax year in question, when you disposed of the shares. However, if you want to offset against your Income Tax, then you will only be able to claim the loss against the year in which it happened, or in the previous year. On the other hand, if you want to offset against capital gain tax, then you can carry the loss forward.

For certain tax reliefs, you (thankfully) should not need to manually apply for these. For instance, if you have held EIS shares for at least 2 years then these should automatically be excluded from inheritance tax when the time comes to value your estate following your death. For peace of mind, however, we recommend consulting an independent financial adviser to ensure that you meet the relevant conditions for this tax relief.

If you are paid via PAYE and do not typically deal with a tax return, then it is possible to complete the form attached to the EIS3 certificate and send this to HMRC without necessarily having to go through the hassle of applying for Self Assessment.

 

Is EIS an UCIS (Unregulated Collective Investment Scheme)?

By | EIS Investments

The Enterprise Investment Scheme (1994) opens some exciting opportunities for people to invest in UK startups and small businesses. Yet there are misunderstandings surrounding EIS, and one of them concerns whether it fits the description of a “UCIS” (Unregulated Collective Investment Scheme).

In this article, we’ll be tackling this question head-on whilst shedding light on some other common myths about EIS. We hope you find this content helpful, and invite you to get in touch if you are interested in our EIS investment opportunities here at Bure Valley Group.

Please note that this content is for information and inspiration purposes only, and should not be taken as investment or financial advice. The value of your EIS investment might go up or down over time, and you might not get back the original value of your investment.

 

What is a “UCIS”?

The UK’s Financial Ombudsman describes an Unregulated Collective Investment Scheme as a complicated type of fund, which many people contribute to. The money in this fund will then be used by an investment manager to invest in different types of assets including stocks, bonds or commercial property in order to generate a return for the investors.

This sounds like any other ordinary fund, you might think. However, the key difference with a UCIS is that the fund is not recognised or regulated by the Financial Conduct Authority (FCA). What this means is that the fund is not subject to the same rules as regulated funds, which are intended to protect investors.

A UCIS fund is also more free to invest the fund’s resources in less common investments such as forestry and foreign property. These types of investments are typically regarded as posing a higher level of risk compared to other, regulated investments.

 

Why do some people think EIS is the same as UCIS?

Many people regard an EIS investment essentially as a UCIS, which tends to come with a lot of negative connotations (e.g. since the FCA advises against most people investing in an UCIS). Sometimes Venture Capital Trust (VCTs) are also lumped in the “UCIS bag”.

The reality is that since 2013, both EIS and VCT investments have been officially declared exempt from the FCA’s ban on the promotion of UCIS investments to “retail investors”. In other words, the Enterprise Investment Scheme is not officially regarded as an UCIS (unless they have been structured as UCIS).

This is not to downplay the similarities between EIS and UCIS investment opportunities. Indeed, it is important to be aware of them (as well as the differences), in order to help inform your thinking when speaking to an investment adviser about where EIS should sit in your portfolio. For instance:

  • EIS investments are not covered by the Financial Services Compensation Scheme (FSCS), which is the same for UCIS investments. This is mainly because EIS companies are unlisted on recognised stock exchanges. So, if your investment in an EIS company fails you cannot get your money back under the FSCS. However, any broker or platform offering an EIS investment opportunity to you must be FCA authorised, and the investment must be offered to you and conducted in a compliant manner. If the EIS broker or platform fails to do this, then you might be able to make a FSCS claim.
  • A UCIS involves getting investors to pool their money into a fund. With EIS investments, you can similarly “pool” your money with order investors into an EIS fund. However, one key difference is that a UCIS fund will not be regulated by the FCA, whilst an EIS fund must be approved by the FCA and work in compliance with its rules.
  • A UCIS investment can only be promoted/marketed to and used by someone if they qualify as a certain “type” of investor, defined by the FCA (e.g. A sophisticated investor). An EIS opportunity, however, can be promoted to retail investors.
  • A UCIS does not pose any significant benefits to prospective investors in the form of tax relief. An EIS investment, however, can offer a number of benefits to investors if certain restrictions and conditions are met. For instance, it is possible to claim Income Tax Relief on 30% of the value of your EIS investment, up to £1m in a given tax year.

 

Final thoughts

EIS investment opportunities present a number of attractive benefits to investors which are unavailable when investing in an UCIS. The Income Tax Relief mentioned above is just one of them, whilst there is also the Capital Gains Tax Relief you can claim on the sale of your EIS shares (assuming you hold them for a minimum of three years). You can also pass on you EIS shares to your beneficiaries as an inheritance, tax-free if you hold them for two years.

However, it’s important to be aware of the risks of investing in EIS too, despite the fact that it does not come under the FCA’s definition of a UCIS. For instance, EIS investments are, by nature, more “illiquid” than many other investment types – requiring a minimum commitment period of three years in order to claim the tax benefits. So you need to be prepared to think in terms of 3-5 year investment cycles when it comes to EIS.

One of the benefits of working with an investment platform such as ours here at Bure Valley Group, is that it gives a greater level of transparency to EIS investing. This can give you much more confidence and peace of mind when it comes to deciding upon an EIS investment opportunity, which we have thoroughly investigated for you and have vetted into our qualified list of projects here in our network.

EIS Case Study: Cudo, the “Airbnb of cloud computing”

By | EIS Investments | No Comments

Here at Bure Valley Group, we’re excited to highlight one of the exciting new startup ventures which has joined our network, and which is seeking funding to boost its growth.

Cudo is leading the way in a new marketplace, described as the “Airbnb of cloud computing.” In short, Cudo finds idle computers across the world and uses their processing power for commercial or charitable purposes.

It is estimated that nearly half of the computers on the planet are idle at any given moment, as are about 2 billion smartphones. When you add up the value of this hardware it represents over $1tn; a figure which dwarfs the $75bn which Amazon Web Services and other cloud computing providers are set to spend each year developing new, large cloud computing infrastructure.

The idea is exciting and actually quite simple: why create lots of new equipment to meet consumers’ cloud computing demands when the equipment is already here – sitting on smartphones, laptops and desktop PCs in homes and offices across the world?

 

A bit of background

Cudo is the creation of Matt Hawkins, who founded the business in 2017. Matt is an experienced tech entrepreneur who previously founded C4L in 2000 – a network services and data centre hosting provider which was acquired in 2016 for £20m.

Cudo was started using £2m of self-funding and launched its beta in October 2018 to a user-base of 20,000 spread across over 130 countries. From the beginning of 2019 user revenue has steadily increased from $22,000 in March to $70,000 in May.

 

How it works

Of course, investors are likely asking at this stage: “how does the company make its money?” In short, if any users’ hardware is used to generate a profit then Cudo takes a commission on that profit. At the moment, the percentage is set at 6.5% and soon set to increase to 10%.

Naturally, at this point, the question is likely to be: “What kinds of profits are we talking about here?” The answer depends on the type of user concerned. For instance, profits from “standard users” typically range from £0.03 to £50 per month. Larger users, however, such as server farms can produce monthly profits of £1,000.

 

The opportunity ahead

In 2018 the cloud computing industry was estimated at $160bn and is projected to reach $227bn by 2021. With demand for cloud computing dramatically outstripping supply (even with the top 24 infrastructure providers investing $75bn each year), Cudo is in a strong position to establish itself and grow its market share.

 

Sustainable competitive advantage

One of the primary attractions to Cudo for users concerns its pricing. Large, existing cloud computing providers such as Amazon AWS and AIBrain offer their services for thousands of pounds per month, making these solutions only accessible to Enterprise businesses.

Amazon’s xlarge AI resource, for instance, costs £9,000 per month. Cudo, on the other hand, can provide the same cloud computing capacity and resources for as little as $300 per month.

Cudo’s business model also allows it to position its brand effectively as an ethical, environmentally-friendly cloud computing solution. Whilst large businesses like Amazon need to pull resources out of the ground to build new, large cloud servers, Cudo leverages existing computing infrastructure to provide its service.

 

Find out more

Are you an investor interested in finding out more about Cudo? If so, then fill out the form below to request the full Investment Memorandum from Bure Valley Group.

What’s the Difference Between EIS & VCT?

By | EIS Investments | No Comments

The Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) both offer distinct pros and cons from an investor’s perspective. They seek to offer an alternative investment route from traditional public markets, combined with compelling tax benefits.

Understanding the key differences between EIS and VCT is crucial for investors looking to diversifying their portfolio, put investment towards innovative startups whilst also mitigating their risk exposure. Here, we will outline how the two compare to help you inform your thinking.

Please note that this content is for information purposes only, and should not be taken as financial or investment advice. Capital is subject to risk and you may get less money back from your investment, compared to what you originally put in.

 

Overview: How EIS & VCT got here

The past decade has seen a rapid increase in the EIS and VCT markets, during which time both have almost doubled in size.

EIS was launched by the UK government in 1994. Since then, over 27,000 businesses have received funding via the scheme. Over £18bn is estimated to have been raised and costs to the treasury are estimated at over £3bn (in the form of tax relief), yet the return in the form of new jobs is likely to benefit government revenues in the longer term.

VCTs were started at around a similar time, in 1995. Since that time, under this scheme, nearly £7bn has been raised from investors.

There are many reasons for this growth in the EIS and VCT markets, but undoubtedly a big factor has been important changes in the world of pensions.

For instance, it wasn’t too long ago that you could put over £250,000 towards a pension each year. In 2019-20, however, this annual allowance has been reduced to £40,000. For those on higher incomes, the allowance is even lower.

Successive governments have also been keen to encourage growth and innovation amongst UK startups, to drive growth in the wider economy. As we will see now, EIS, in particular, was set up with this purpose in mind.

 

How EIS & VCT compare

A Venture Capital Trust (VCT) is essentially a publicly-listed company which contains a fund manager, who invests your money and others’ into smaller businesses which are not publicly listed on primary stock exchanges.

One important feature of VCTs which makes them attractive to investors is the tax relief on offer.

When you buy newly-issued VCT shares, for instance, you can claim up to 30% Income Tax relief on the amount which you invested. The main condition here is that you need to hold the VCT shares for at least 5 years to keep the tax relief.

Moreover, if you do eventually decide to sell your VCT shares then any profit you have made from the sale should not be subject to Capital Gains Tax.

That’s not all, however. Any dividend income you make from VCT shares is not subject to Income Tax either and does not need to be declared on your Self Assessment form.

You can put up to £200,000 into VCTs per financial year, in 2019-20.

An enterprise investment scheme (EIS), on the other hand, is not a “company” (like a VCT). Rather, it refers to a collection of tax reliefs offered to investors by the UK government, when they choose to invest in companies which qualify for EIS status (particularly start-ups).

Similar to VCTs, however, you can claim up to 30% Income Tax relief on an EIS investment. So if you commit £20,000 towards EIS-qualifying firms in a given financial year, for instance, then you “save” yourself £6,000 in the form of Income Tax relief.

In another echo to the structure of VCTs, you must hold your EIS shares for a minimum of 3 years to claim the tax reliefs on offer.

You can invest up to £1m per financial year in EIS-qualifying companies, provided you are not connected to any of them (e.g. via family ties) and provided you are a UK taxpayer.

One of the powerful allures of EIS to investors is the “EIS loss relief” mechanisms. This allows you to claim back some of the value of your original investment, in the event that it fails. The percentage you can claim back is equal to the highest rate of Income Tax which you pay.

Imagine, for instance, that you invest £10,000 towards an EIS-qualifying company but it fails. First of all, you claim back 30% in the form of Income Tax relief – meaning £7,000 of capital is, in fact, at risk (not £10,000). Then, you claim back 45% of the value of your at-risk capital (since 45% is the highest Income Tax rat which you pay). So, 45% of £7,000 is £3,150 – which means that you have only lost £3,850 rather than £10,000.

 

VCT vs. EIS: Which is better?

Clearly, both options provide powerful routes for investors to commit their wealth. Both offer significant tax reliefs, for instance, which are hard to replicate elsewhere.

It is probably fair to say that VCTs and EIS are more suitable for particular investment strategies. For instance, VCTs can be attracted to higher-rate taxpayers who are seeking a supplementary, “top-up” income during their retirement. This is because VCT returns are typically paid to investors in the form of dividends, which are not subject to tax.

From an investment perspective, however, EIS clearly has an important advantage in the form of loss relief – offering substantial downside protection to EIS investors, whilst allowing you to take advantage of the investment upside potential. EIS can also be a powerful tool within a wider estate planning strategy. This is because EIS investments are not usually subject to inheritance tax once they have been held for a minimum of 2 years.

Here at Bure Valley Group, we focus on offering investors a selection of exciting EIS and SEIS-qualified investment opportunities. To browse our latest projects, we invite you to take a look at our portfolio here.

 

How Much Can I Invest in SEIS?

By | SEIS Investments | No Comments

In 2019-2020 you can invest up to £100,000 each financial year into UK companies which qualify for the Seed Enterprise Investment Scheme (SEIS).

This exciting investment scheme is still relatively unknown amongst investors, but it offers great opportunities for investors to engage with innovative startups whilst reducing their risk exposure.

This short guide outlines, in broad terms, how much you can invest in SEIS and explains some of the great benefits on offer. As we’re sure you’re aware, please note that this content is for information purposes only and should not be taken as investment advice. Capital is at risk and you may get less money back than you originally put in.

 

SEIS Benefit 1 for investors: 50% Tax Relief

One of the key benefits of SEIS to investors is the attractive tax reliefs available.

In particular, investors can receive a 50% tax relief on their SEIS investments (which, remember, must be no higher than £100,000 per UK tax year).

In practical terms, that means you could make a £50,000 SEIS investment and get £25,000 back in the form of income tax relief.

 

SEIS Benefit 2 for investors: CGT Tax Relief

Under SEIS, any gains you make on shares which you own within a SEIS-qualifying company are also usually exempt from Capital Gains Tax.

The main condition here is that you must hold the shares for at least 3 years

Suppose, therefore, that you make an investment of £20,000 and this triples in value over three years. Your shares are now worth £60,000, and if you decide to sell them then the £40,000 gain you have made should not be subject to CGT.

Of course, this is just an example and it’s important to remember that your investment might also go down in value over time.

One important caveat to mention here is “deferral relief.” Here, you can “put off” any CGT on any asset which you sell and then go on to invest in a SEIS-qualifying company. However, you will probably have to pay CGT on the SEIS shares when you eventually do sell them.

 

Benefit 3 of SEIS for investors: Loss mitigation

You can off-set any investment losses against your Income Tax bill, too. The amount you get back is equivalent to your highest income tax bracket, which can significantly reduce your risk.

For instance, suppose you are taxed at the 45% rate. That means you could claim back up to 45% of your SEIS investment if it fails. So, imagine the following scenario:

  • You invest £20,000 into a SEIS-qualifying business.
  • You get 50% of this amount back in the form of a 50% tax bill reduction.
  • Your at-risk capital is, therefore, actually £10,000.
  • The company, unfortunately, fails and so leads to a total loss in share value.
  • Your loss relief on this £10,000 is 45% (i.e. your highest income tax bracket).
  • Your real loss is, therefore, £6,500. Not £20,000.

 

Benefit 4 of SEIS for investors: Inheritance tax relief

As if the above benefits were not enough, if you hold your shares in a SEIS company for at least two years then they can be exempted from your inheritance tax bill.

So, take the example from point 2 above, once more. Suppose your £20,000 SEIS investment grows to £60,000 over three years. Soon after this point, you die and leave your investments to your sons and daughters. This £60,000 should be able to pass to them, free of IHT.

 

Important rules for SEIS investors

To be able to invest in SEIS-eligible companies, you must:

  • Be a UK taxpayer.
  • Only invest up to £100,000 into SEIS-qualifying schemes each financial year.
  • Hold your shares for at least 3 years, or risk experiencing “relief clawback”.
  • Not carry-forward tax relief under SEIS.

 

Rules for SEIS companies

There are not just rules for investors under SEIS, but also for companies looking to receive funding via the scheme. In particular:

  • A company can raise up to a maximum of £150,000 via SEIS funding.
  • The business must employ no more than 25 full-time staff.
  • The company cannot have traded for more than 2 years.
  • No more than £200,000 worth of assets can be possessed by the business.
  • The business must carry out a government-defined “qualifying trade”. Examples of trades which might not qualify include financial services and property development.

 

Guidance for investors: things to look for

Naturally, if you are interested in investing via the SEIS scheme then you should check whether the company pitching to you meets the criteria outlined immediately above.

Moreover, it is also a good idea to look for evidence of “advanced assurance”. This is whether HMRC grants the company seeking SEIS status a formal letter, which usually takes the form of a certificate outlining the benefits that the investors will receive from the SEIS investment.

You will also naturally want to consider whether you are interested in the pitch, and also “stress test” the viability of the company’s business model to ensure your investment has the best possible chance of meeting success.

At Bure Valley Group, we help with this latter point by gathering a set of “pre-stress-tested” companies which qualify for presentation to our network of experienced SEIS investors.

These businesses are exciting and full of potential, driving innovation in a number of key industries. If you are interested in exploring our range of current EIS and SEIS investment opportunities, then we invite you to check out our SEIS portfolio here.

If you have any questions about how SEIS works or how we at Bure Valley can assist you in incorporating SEIS opportunities more into your investment portfolio, then we’d love to hear from you. Get in touch via +44 160 334 0827 or [email protected].

 

Why Cybersecurity is becoming a top choice for UK Investors

By | For Angel Investors | No Comments

The UK has made concerted efforts in recent years to attract, incubate and grow digital talent and innovation within the country. Consequently, we are witnessing a proliferation of new tech companies on a scale never seen before.

One aspect of this growth concerns cybersecurity. These startups are continuously breaking new ground in the sphere of online protection for consumers, companies and governments, Many of them have produced big returns for the investors who have funded them.

Here are just a few prominent examples…

 

#1 Darktrace

Recently valued at $1.65 billion and with the latest funding round raising $50 million, Darktrace has increased its valuation by 32% in the space of just four months.

Founded in 2003, Darktrace identifies and tackles cybersecurity threats as they appear using AI technology (artificial intelligence) and machine learning. The rapid expansion of the company has enabled it to increase its staff by 60% over 12 months, up to 750.

With prominent hacks in the recent news (e.g. the British Airways attack which compromised nearly 400,000 customer credit card details), investors should take note that the services of cybersecurity firms like Darktrace are likely to be in high demand for years to come.

 

#2 Garrison

The latest funding round for Garrison secured $30 million, one of the largest rounds by UK investors in 2018. It’s stated mission is to provide a secure web browsing experience for companies regardless of the content or links their staff click on.

Essentially, Garrison acts as a “gap” between web content and the company’s device, which the user is utilising to access the former. This means that malicious web content only comes into contact with the “gap”, rather than the company’s IT systems.

In the space of just 12 months, Garrison has almost doubled its staff numbers to over 50 people. It has now secured nearly £35 million in funding over the course of two rounds.

 

#3 Panaseer

This exciting and interesting UK cybersecurity business raised $10 million in its Series A funding in the middle of 2018, led by Evolution Equity Partners.

Founded in 2014, the Panaseer platform uses proprietary algorithms to “map out” a business’s various assets, and provide “cyber hygiene” by monitoring and cleaning the organisation’s digital estates. The system detects which aspects of the business’s technology are vulnerable to attack and provides software patches to address the threat.

 

#4 Hazy

A smaller story but a nonetheless impressive one, Hazy (formerly Anon AI and winner of “Best in Tech” at Elevator Pitch) raised $1.8 million in Seed Funding in the middle of 2018.

The business emerged from University College London about 2 years ago, with a ground-breaking AI system which can “hunt down” personal data buried away in datasets.

With the recent introduction of GDPR and the continual governmental concern and drive towards enhancing the protection of personal data, cybersecurity firms like Hazy have a promising future ahead of them.

 

LORCA & NCSC Cyber Accelerator

The UK government has recognised the vital role that cybersecurity will play within the UK economy over the coming decades. New technologies such as AI, quantum computing and blockchain are set to change the world whilst driving economic growth and innovation.

The inevitable rise of new technologies such as these, however, also poses new risks. One of these is the danger posed by hackers and online criminals. Indeed, if Britain’s digital economy hinges on the security of its systems then cybersecurity is arguably going to be indispensable for years to come.

In recognition of this, the government launched LORCA in June 2018 – the London Office for Rapid Cybersecurity advancement. This new initiative is designed to assist cybersecurity companies in the development of their business models.

This development should offer comfort to investors who are interested in cybersecurity startups. Initiatives such as these should help the latter refine their value proposition in order to grow into successful, profitable businesses.

The above isn’t the only initiative currently in operation, moreover. The government’s GCHQ Cyber Accelerator has also recently graduated 9 UK cybersecurity startups from its 9-month programme, which is designed to help such businesses refine their products and services in order to enhance UK national security.

 

Tips for investors interested in cybersecurity startups

Cybersecurity startups face many of the same opportunities and challenges as other firms when getting off the ground. That said, the examples cited above start to give an idea of the growth potential of fintech, cybersecurity and other SaaS startups.

Such firms are usually based around monthly/annual subscription models rather than one-time transactions with customers. As a result, many cybersecurity firms’ business models benefit from a higher degree of predictability and scalability compared to other startups.

Saas startups like these can be accessed anywhere from the cloud, even on mobile devices. They do not need to concern themselves with distribution, packaging or physical piracy. The software is also highly flexible, enabling cybersecurity startups to more quickly adapt to changes and threats in the market environment.

Moreover, as cybersecurity startups grow their cost per acquisition and cost per service for each customer tends to go down. This makes cash flow more predictable ad growth more secure – all reassurances for interested investors.

Finally, many cybersecurity companies offer the investor additional security through “economic moats”, which place high switching costs on the service subscriber. This gives these startups a more sustainable economic and competitive advantage once they have their foot in the door with a signed-on customer.

The above are just a handful of reasons to consider investing in SaaS companies such as cybersecurity startups. These are apart from the other tax benefits offered by such firms which qualify for EIS or SEIS status. For more information on this, please get in touch to speak with one of our specialists.