Category

EIS Investments

How Much Do EIS Companies Contribute to the UK?

By | EIS Investments

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

The UK government introduced the Enterprise Investment Scheme (EIS) in 1994, and at the time, only a few investment firms were pushing this as an opportunity for investors. Today in 2020, however, the investment category has grown substantially; as has the number of firms turning to EIS funding due to the generous tax reliefs and reassurances it offers investors.

What kind of contribution do EIS companies make to the UK economy, however, and what are the prospects for future years? Does the recent market volatility of March 2020 present any kind of threat to the Enterprise Investment Scheme, and how might EIS evolve?

If you’d like to browse our EIS opportunities after reading this guide, then please see our portfolio page. For business owners seeking funding, you can reach us via:

+44 160 334 0827
[email protected]

 

The contribution of EIS to the economy

As a 26-year-old scheme, EIS is well-established and widely recognised by investors as a valuable way to mitigate a tax bill whilst generating returns from exciting, innovative UK companies in a range of growing sectors.

According to the Enterprise Investment Scheme Association (EISA), over 28,000 companies have benefited from EIS investment; receiving over £18bn investment between the introduction of EIS and 2019. Investment into EIS reached its peak in the 2015-16 tax year at £1.98bn, with a slight reduction in the following tax year to £1.93bn.

Not only is EIS a source of immense innovation and technological advances for the UK (e.g. in cybersecurity), but EIS investment has also produced many new jobs. Of course, this also benefits the UK government which can then receive more national insurance contributions (NICs) and income tax from these jobs. Additionally, successful and profitable EIS companies also means more corporation tax contributions for HMRC.

The benefits of EIS do not stop there, however. Over the past thirty years, it has helped to create a thriving startup ecosystem in the UK, boosting entrepreneurialism. This, in turn, has increased prestige for the UK economy which can boast of having facilitated expertise within specialist sectors, thus increasing appeal to global businesses.

 

2020 and EIS

The March budget from the Chancellor made no mention of EIS, rather focusing on containing the economic damage caused by the COVID-19 outbreak. However, the government does seem to be showing its ongoing support for EIS. Advanced assurance for funding is still available to companies seeking EIS-qualified status to show prospective investors. The EISA, moreover, reported in 2019 that these applications have continued to rise over recent years.

However, the government does seem to be cracking down on investors using EIS outside of its intended purposes. In 2020, EIS is set to be more focused on directing investment towards “knowledge intensive” businesses, which feature higher levels of intellectual capital creation, research and transformative/disruptive potential.

COVID-19 has, of course, cast a shadow over the markets and wider UK economy. It is too early to discern the exact effects this will have upon the EIS investment niche, but recent measures by the UK government to stabilise and protect the economy are a positive step in the right direction. Around £330bn in government-backed loans is set to be made available to struggling businesses affected by the outbreak, and this will be extended to EIS companies too. In a sense, therefore, COVID-19 could actually reduce some of the investment risk for some EIS investors, since the jobs and incomes of EIS businesses appear to be made more secure.

One important development for investors from the March Budget, however, concerns the UK government’s decision to slash Entrepreneurs’ Relief. The reasons behind doing this appear to lie in research which suggests the relief has done little to encourage people to set up their own businesses. Nonetheless, this development could, in fact, indirectly benefit EIS by increasing demands to simplify the process of getting Enterprise Investment Scheme (EIS) tax relief.

 

What do future years hold?

Many factors, trends and uncertainties influence the answer to this question. At the time of writing, the UK is still navigating the transition period with the EU until December 2020, with doubts still hanging over whether this will be extended. There is also the Autumn Budget in November, which some predict might include some painful measures to help pay for many of the handouts in the March budget (e.g. tax rises). The COVID-19 outbreak also raises questions over how long this might affect the economy. Could it stretch into 2021 or even beyond?

Of course, it is impossible to fully predict what will happen. However, despite the uncertainties, the UK is likely to remain an attractive place for investors, both domestic and overseas. The Conservative government with its large majority would, ideologically speaking, likely use this position of strength in the House of Common to ensure this entrepreneurial environment not only survives, but also thrives. Given the track record of EIS in contributing to this innovative ecosystem, the future still appears promising for investors looking to leverage the scheme.

 

Invitation

If you are a successful investor looking for EIS opportunities, or if you are a business owner looking for funding, then we’d love to hear from you. Get in touch today to start a conversation with our team, and discuss some of the great investment memorandums we have available:

+44 160 334 0827
[email protected]

 

EIS in 2020 – Are UK Startups About to Boom?

By | EIS Investments

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

You could be forgiven for believing the UK economy is in a dire state, especially in light of the challenges posed by Brexit. Yet Britain is in a strong position as it launches into 2020, and startups (including EIS opportunities) look set to benefit. In January, for instance, the IMF published its projection that the UK economy would grow at 1.4% in 2020 and 1% in 2021.

This closely mirrors the British government’s own projections published on the 19th February, which anticipates 1.2% in 2020 and an additional growth of 1.4% in 2021. Of course, such figures are weak when compared with historic UK growth rates, yet they beat the projections for major economies such as Germany and Japan. Undeniably business confidence is rising, with both the Confederation of British Industry (CBI) and Institute of Directors (IoD) stating that the UK economy is poised to boom – especially in the SME sector – if the Chancellor gets the budget right in March.

 

Implications for EIS opportunities

For EIS investors and those interested in EIS opportunities, this should come as welcome news. Much of the new-found business confidence in 2020 can be attributed to renewed UK political stability, following the landslide Conservative majority achieved in the December 2019 election (bringing more certainty to Brexit policy). There are also reports that UK wages are on the rise, with ONS figures finally showing average UK weekly wages exceeding pre-Financial Crisis levels (i.e. March 2008). Weekly pay, in other words, now stands at around £512; the highest rate in nearly 12 years, after inflation.

All of this points to strong conditions for EIS opportunities and startups to thrive. Here at Bure Valley Group, this certainly correlates with many of the exciting EIS projects which are active in our portfolio at the moment. The women’s labour market is showing particularly promising signs, with women in employment now at a record high of 15.16 million (up from 13.80 million in 2019).

Eyes will now be on Rishi Sunak, the new Chancellor of the Exchequer, and the budget looming on the 11th of March. The Conservative manifesto made little mention of EIS in December 2019, but Sunak is widely seen as “pro-SME” in light of a past paper he wrote which called for the creation of a bond investment exchange for small businesses. The idea here would be to allow ordinary investors to trade bonds like shares, generating fresh capital for SMEs. Certainly, we at Bure Valley Group will be watching this closely and invite you to subscribe to our newsletter to get the latest updates on this important subject!

 

How EIS investors can prepare for 2020

Whatever happens with EIS in 2020, investors should not abandon the fundamental principles of investing wisely (e.g. diversify appropriately, be mindful of your risk tolerance etc.). However, it seems quite certain that Brexit is likely to dominate UK market performance. This could make 2020 a good time to consider buying some promising bonds in the UK on the cheap, and to also consider diversifying your portfolio with compelling EIS investment opportunities.

As a reminder, here are just some of the reasons to think about including EIS in your portfolio:

  • EIS income tax relief. In 2019-20, you are allowed to claim up to 30% of the value of your EIS investment against your income tax bill. So, if you invest £20,000 in an EIS opportunity you could save £6,000 on your income tax bill.
  • EIS capital gains tax (CGT) relief. One of the great benefits of EIS shares is that they are exempt from CGT if you hold them for at least three years, before selling them at a profit. You can also make use of “deferral relief”, which means you do not have to pay CGT until later if you dispose of an asset.
  • EIS loss relief. Suppose you invest in an EIS-qualifying company and it fails, losing you money. Under the EIS system in 2019-20, you can claim loss relief at your highest rate of income tax. So, if you’re an additional rate taxpayer you could claim back 45% of the original value of your EIS investment. When this is combined with your income tax relief, this significantly reduces your at-risk capital. For instance, suppose you invest £100,000 in an EIS opportunity and the company tragically fails. As a first step, you could claim back 30% of this amount against your income tax bill (£30,000). The remaining £70,000 can be subject to loss relief. If you’re an additional rate taxpayer, this would equate to 45% on the £70,000 (i.e. £31,500). In other words, the at-risk capital in this particular example would be £38,500.

 

Invitation

There is much to be positive about EIS investing in 2020. Moreover, there are many exciting EIS opportunities on offer here at Bure Valley Group which we would love to share with you.

If you are a successful investor and would like to know more about the exclusive property loan note opportunities we offer here at Bure Valley Group, then we’d love to hear from you. Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:

+44 160 334 0827
[email protected]

 

EIS, SEIS and VCT – which is best?

By | EIS Investments

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

If you are interested in investing in small companies which do not necessarily trade on the London Stock Exchange, then financial advisers and investment brokers are often quick to talk about Venture Capital Trusts (VCTs), the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). What exactly are these different schemes, how do they work and which advantages or disadvantages do they hold over one another?

Here at Bure Valley Group, we help successful investors find exciting, tax-efficient investment opportunities in companies which offer promising returns. In this short guide, we’ll be sharing some thoughts on how VCTs, EIS and SEIS work and how they might feature in your portfolio (after seeking professional financial advice).

We hope you find this content useful. If you would like to browse our latest EIS and SEIS opportunities then please visit our portfolio. Alternatively, to request an official investment memorandum regarding a specific project, please use our online form here.

 

An overview of EIS, SEIS & VCT

To quickly summarise, all three are UK government schemes intended to encourage investors to commit capital to startups, small businesses or key economic sectors. This is mainly achieved by offering investors attractive tax benefits. In particular:

  • EIS allows an investor to commit up to £1m per tax year into EIS-qualifying companies (or up to £2m if the business is “knowledge-intensive”). 30% of your investment can then be claimed back on your tax return, against your highest rate of income tax.
  • SEIS follows a similar format to EIS, except you can invest up to £100,000 per tax year in SEIS-qualifying companies and you can claim back 50% of your investment against your highest rate of income tax.
  • VCTs work slightly differently. These are actually “funds” listed on the London Stock Exchange, and they invest in small unquoted businesses using investors’ pooled money. Here, you can invest up to £200,000 per tax year into VCTs and claim back 30% against your highest rate of income tax.

 

Key differences & similarities

You’ll notice that the EIS, SEIS and VCT schemes all share a common thread in the form of tax relief against your income tax bill. They differ, however, in the amount you can invest into each one within a given tax year. Here are some other important areas of similarity and distinction:

Dividends

Companies which qualify for EIS or SEIS may pay out dividends to investors; as might VCTs. Here, there is a key difference in that dividends from VCTs are usually tax-free, but dividends from EIS and SEIS are subject to dividend tax. It’s worth noting, however, that the small private companies under these schemes rarely pay out dividends anyway.

Capital gains

EIS, SEIS and VCT investments are highly attractive because all three allow you to grow the value of your shares and later dispose of them tax-free. The key difference here is that you do not have a hold your VCT shares for a minimum period to claim CGT relief, yet with EIS and SEIS you must retain your shares for at least three years.

Holding period

Minimum investment periods are not only relevant to CGT, however. To gain access to the income tax relief, you must also hold your VCT shares for at least five years and your EIS/SEIS shares for at least three.

Inheritance tax

VCT investments are not eligible for business property relief. This means that they will be counted as part of your estate for inheritance tax purposes. EIS and SEIS shares, however, are not included within the value of your estate if they have been held for at least two years.

 

VCT, EIS or SEIS – which is best?

There are other important features, advantages and disadvantages to VCTs, EIS and SEIS opportunities which we could cover. At this point, however, you might be asking which of the three is superior, and how they might feature within your investment portfolio.

At Bure Valley Group, we cannot offer financial advice for your distinct situation. However, quite often two or three of them will feature within a portfolio, with the precise blend varying depending on factors such as your investment goals and risk tolerance. A particular benefit of each scheme might appeal to you at a particular time. For instance, if you are retired and looking for ways to reduce an inheritance tax bill, then EIS and SEIS can be a compelling option as these shares can potentially be handed down to your beneficiaries, tax-free, after two years.

One important feature of EIS, SEIS and VCT investments is that they are typically classed as “higher-risk, higher reward.” It’s important, therefore, to establish with your financial adviser that these investments suit your risk profile before committing to them.

Assuming they are suitable, however, one strong advantage of EIS and SEIS to consider is their “loss relief” aspect (not available under VCT). Here, you can mitigate your losses if your EIS or SEIS investment fails. Under SEIS, for instance, you can claim at your highest rate of income tax. So if you pay the 45% additional rate and your SEIS investment fails, you can potentially claim back up to 45% of your original investment via your tax return.

 

Invitation

If you are a successful investor and would like to know more about the exclusive EIS and SEIS opportunities we offer here at Bure Valley Group, then we’d love to hear from you.

Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:

+44 160 334 0827
[email protected]

 

“What is the maximum EIS investment?” and other Q&As

By | EIS Investments

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

As a specialist in both EIS and SEIS investment opportunities (Enterprise Investment Scheme and Seed Enterprise Investment Scheme), we get a lot of questions here at Bure Valley about how these schemes work, which benefits they offer investors and how to start investing through them. In this short guide, our team will be answering some of the most common questions we receive here from EIS and SEIS investors.

We hope you find this content helpful, and invite you to get in touch if you would like to speak to us about funding your EIS/SEIS business, or if you are a successful investor seeking exciting new opportunities to generate a return. Reach us on:

+44 160 334 0827
[email protected]

 

Q: “What is the maximum EIS investment?”

A: If a business qualifies for the Enterprise Investment Scheme then it is allowed to raise up to £5m each tax year, and £12m in total over its lifespan. Investors seeking the tax reliefs, however, are each limited to investing up to £1m in EIS-qualified companies each tax year.

 

Q: “Can a company invest in an EIS scheme?”

A: You are allowed to invest into EIS-qualified companies via a company, yes. However, bear in mind that the tax reliefs of EIS are only open to individuals.

 

Q: “How long does EIS last?”

A: This question is often asked by companies who wish to know how long they are entitled to their EIS-qualified status. The answer is: for as long as your business meets the criteria specified under the EIS rules. For instance, your company cannot own more than £15 million of gross assets, and you must employ fewer than 250 people.

 

Q: “How long does EIS take?”

A: Most business owners applying for EIS status will be anxious to hear from the government as quickly as possible, regarding the approval of their EIS application. Turnround times will vary, of course, yet HMRC typically takes 4-6 weeks to process everything and get back to you.

 

Q: “Do EIS pay dividends?”

A: EIS-qualified companies can pay dividends to their investors. However, many choose to “roll-up” their income within the company as tax-free growth.

 

Q: “What’s the difference between VCT and EIS?”

A: VCT stands for Venture Capital Trust, which has some similarities to EIS. Both offer investors up to 30% Income Tax relief on the value of VCT/EIS investments, for instance. However, there are some important differences between the two. An important example concerns “carry back”. Here, investors can potentially carry back their EIS investments to the previous tax year, yet VCT investments cannot do this.

 

Q: “What happens to EIS shares on death?”

A: If you hold your EIS shares for at least 2 years then these will usually fall outside the value of your estate. This means that, upon your death, they will not be counted as taxable assets when the government and you executors are determining your IHT liability.

 

Q: “Are EIS investments covered by FSCS?”

A: The Financial Services Compensation Scheme (FSCS) applies to schemes regulated by the Financial Conduct Authority (FCA), which protects savers’ money up to the value of £85,000. Unfortunately, this does not apply to investment failures under EIS.

However, any brokerage or fund offering EIS opportunities should be authorised by the FCA. This does offer an important degree of protection to investors, as they might be able to make a claim if the firm did not behave in a compliant way, or advised them incorrectly.

 

Q: “Can I be connected to an EIS company?”

A: If you wish to invest in an EIS-qualified company and claim the tax reliefs available to investors, then you need to be “appropriately distant” from the company. Under the EIS rules this includes important criteria, for instance, which prohibits you from being an employee of the business. You also cannot own more than 30% of the share capital of the company.

 

Q: “Can I invest into the same EIS company as my spouse/partner?”

A: You are both allowed to invest into the same EIS company, yes. However, bear in mind that the rules about “appropriate distance” (i.e. connection) to the company will apply to you both, as a single entity. For instance, if one of you owns more than 30% of the share capital of the EIS company in question, then your spouse/partner is unlikely to be allowed to invest in the business and also claim the tax reliefs.

 

Q: “What can an EIS investment be spent on?”

A: If you make an EIS investment into a qualifying company then they must spend that capital on a “qualifying business activity” within two years of receiving the investment. For instance, the business will not usually be permitted to use the funds to acquire another business, or to acquire further investments for itself. However, the money could be used to carry out a “qualifying trade” or to conduct research and development.

 

Invitation

If you are a successful investor and would like to know more about the exclusive EIS and SEIS investment opportunities we offer here at Bure Valley Group, then we’d love to hear from you.

Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:

+44 160 334 0827
[email protected]

 

A Short Guide to Renewable Investments

By | EIS Investments

Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.

2019 is an exciting time for renewable energy. Alternative power sources have become more viable and lower in cost due to improvements in supply chains, larger turbines and negative movements in the oil and gas markets. Global demand for renewables is on the rise as countries across the world experience the detrimental impacts of climate change, and strive to counteract them.

Domestically, there is also political pressure for increased investment into renewables, making it more attractive to investors. The National Climate Change Act (passed by the UK House of Commons in 2008) is still in effect, and binds successive British governments to reduce the country’s carbon footprint by 80% by 2050. “Green” policy commitments are also becoming a more central plank of different political parties’ manifestos, as British citizens increasingly demand that more should be done to reduce the UK’s emissions.

 

Reasons to Invest in Renewable Energy

Clearly there is much growth currently going on in the renewables sector, and this looks highly unlikely to change in the near future. However, there is a range of other compelling reasons for people to consider committing capital towards renewable energy investments, including:

  • Rise in employment numbers. A rise in investment and renewable companies (in terms of volume and scale) is likely to correspond with an increase in jobs within the sector – both domestically and overseas.
  • Technology growth. The speed of growth within the renewables sector is highly attributable to rapid advancements in technology. Indeed, hardly a month seems to go by without an exciting startup coming forward with a pioneering innovation which provides cleaner, more efficient energy for customers. Advancements such as these are only likely to continue and accelerate, especially since the UK government will face a huge challenge meeting its commitments under the National Climate Change Act without new technologies which make this more achievable.
  • Ethics and norms. There is little doubt that much of humanity has caused immense harm to the physical environment through human behaviour, buying habits and population growth. By investing in renewable energy, investors can make a positive contribution to our world by working with companies which mitigate and counteract this harm.
  • Trade and economic development. There is a strong case to argue that high levels of fuel imports can have a negative impact on a country’s trade balance. By becoming more reliant on green energy sources, however, this can help to reduce national debts and encourage growth in GDP and living standards. Trade is also boosted as demand within these countries accelerates for renewable energy services and technology. Overall, this means that renewable investors can help to lift countries out of poverty, reduce global inequality and boost the quality of life for people across the planet.

 

Ways to Invest in Renewable Energy

There is no single way to invest in renewables, but a range of available options depending on your unique financial goals and circumstances. It is a good idea to speak to an independent financial adviser prior to committing large sums of capital.

Here are just some of the main ways people can invest in renewables:

 

Exchange-Traded Funds (ETFs)

One way for investors to invest in multiple renewable energy companies is to work with a financial adviser to find one or more ETFs to commit capital to (e.g. the iShares Global Clean Energy ETF). These are usually passive investments which follow the index of a specific market or sector, with their value rising or falling in line with the index.

 

Direct Investment

Of course, if you have the inclination and the funds you can also choose to approach renewable energy companies directly and offer your investment. This can be a higher-risk option for investors, but it can also present opportunities for higher returns.

This is the approach we take to renewable investing here at Bure Valley Group. In particular, there are two important additional benefits for investors who choose to leverage our network of investment opportunities:

  • Vetting. In order to qualify for presentation to our exclusive network of investors, we need to be confident that their business model is viable and stands up to scrutiny. This means that our renewable energy investment opportunities have undergone rigorous “stress testing”, which lowers the risk for our investor network.
  • Tax efficiency. Here at Bure Valley Group we typically work with companies which not only offer an attractive return to investors, but also a strong tax incentive. In particular, many of our projects are seeking funding under the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS), which can enable investors to leverage significant tax benefits (e.g. off-setting the value of their investment against their income tax bill, or making capital gains which are exempt from tax). Please note that these benefits come with important conditions
  • Diversity. The renewables sector encompasses a wide range of exciting investment opportunities including solar, wind, hydro and more. It can be difficult to know where to find these different opportunities on your own, yet at Bure Valley Group we bring many of these different companies together for your consideration.

Invitation

If you are a successful investor and would like to know more about the exclusive renewable energy investment opportunities we offer here at Bure Valley Group, then we’d love to hear from you. Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:

+44 160 334 0827
[email protected]

 

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]

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.