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JUNE 2015 ISSUE 03

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USING ALTERNATIVES THE ADVISERS VIEW

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SEIS EIS VCT SITR IHT BPR

The IFA Guide to Tax Eff ic ient Invest ing

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EIS Magazine is published by IFA Magazine Publications Limited, The Old Wheelwrights, Ham, Berkley, Gloucestershire GL13 9QHFull subscription details and eligibility criteria are available at www.eismagazine.com2015. All rights reserved.

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Upcoming Events

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An Adviser Seminar on ETFs from IFA Magazine and EIS Magazine. Opportunity for advisers to get face-to-face access with some of the leading tax efficient investment managers in ETFs.

30th June 2015The Capital Club, London

Registration is freeFull details at http://tinyurl.com/pnqekyyThis extended seminar will examine the basic features of the exchange traded funds market and will discuss the choices and strategies available to advisers when selecting funds on behalf of clients. Essential knowledge!

WelcomeA welcome election result, regardless of your political standing. Michael Wilson says a clear result is a good result. But what comes now?.

News in BriefOur monthly round-up of news stories. Keep sending us your news, please.

Social InvestmentRobin Smeaton from City Partnership surveys the Social Investment Tax Relief scene and brings us up to date on whats available..

Complementary Portfolio PlanningEdward Grant from Ingenious Investments says holding the right assets can help to stabilise a portfolio.

The Estate Planning ChallengeSimon Ruthers from Oxford Capital Discusses Ways of Reducing IHT Liability.

Open OffersOur monthly listing of whats currently available for subscription.

Adding Value Through Effective IHT PlanningInheritance tax is affecting more people and its time to look further than the traditional methods of estate reduction.

Wind Power Still InvestingA look at two current projects from the McKinnons stable.

The EIS Tolley DiplomaGet wise, get with it, get trained. Mary Rodgers from EISA introduces the new online EIS diploma and explains why its an essential part of any advisers armoury.

Making Hay Without The Sun ShiningJames Ramsey from Puma Investments says that EIS investors have more energy-related options than they probably think, now that conventional renewables are off the agenda.

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Plugging the Pensions GapToby Smart from Blackfinch explains how the right EIS/SEIS/VCT choices can put back what the 1 million cap has taken away.

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What do Advisors Really Think?Michelle McGagh asks the key players for their views on EIS and VCT strategy.

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4 EIS Magazine

WelcomeWell, we finally got there. The Tories absolute majority

on 7th May came as a bombshell for the election pundits, most of whom had been asking themselves not just what sort of an unwieldy coalition wed be looking at but also whether it would have the mandate to get anything done at all.

Thats one question we wont have to ask for another five years, then. So farewell and adieu, Messrs Balls, Miliband, Clegg and Farage. (Or is it just bientt?) Either way, Chancellor George Osborne can be feeling pretty pleased with himself. As long as the Tory whips hold the line, he has the freedom to do exactly what he wants. For five whole years.And so now, with the inevitability of the second boot falling off a shelf, comes the corrective Budget that will be unveiled on 8th July. The March one was always going to be a bit of an electoral groundbaiting exercise it was ever thus! and there wont be quite the incentive this time for Mr Osborne to keep it palatable. But do we need to brace ourselves?We dont know. But we can say one thing for sure is that the primary part of this budget will be about filling in all the blanks that the pre-election Chancellor has left in the programme for public spending cuts. According to the Institute for Fiscal Studies, only 2 billion of the 12 billion worth of welfare cuts announced so far has actually been costed. And, for all that the Chancellor intends the July statement to be a budget for working people, that extra ten billion is going to take a bit of finding.

And So To AlternativesSo wheres the money going to come from? We may well ask. But Mr Osborne has already said that he plans a tougher tax crackdown - and not just on avoiders, either. One way or another, its likely that wealthier clients are going to find themselves steered increasingly toward more inventive solutions if they want to avoid getting caught up with Amazon and the non-doms. And more adventurous too.Thank goodness, then, for alternative investments, which appear to fit the bill in so many ways. And which catch the business mood of the moment so perfectly. Mr Osborne has not, on the whole, displayed very much awareness so far of how jobs are created in the private sector, but hes right in supposing that small and ambitious companies have a faster job creation rate than their more cumbersome rivals. And that this is where the future lies. Small wonder, then, that the range of tax-efficient vehicles for more risk-tolerant investors

is expanding so fast. Or that the Chancellors next move is into getting the middle-affluent into social investment, via Social VCTs and the like.Carrot and StickThere is, then, not much risk of any backpedalling from Number 11 on the alternatives question. But nor is there much doubt that were being firmly steered in this direction with an elaborate carrot-and-stick operation. The stick is the tax clampdown (avoiders beware!), the probable ending of higher rate tax relief on pension contributions, and of course the reduction of the lifetime pension cap, from 1.5 million to 1.25 million and on toward 1 million next year. (As our authors this month have reminded us, 1 million in your pension fund wont get you much more than 30,000 a year after you retire.)The carrots include the effective extension of the IHT allowance to 1 million at least, for property-owning couples who can exempt an extra 350,000 of their homes value from the taxman; the raising of income tax thresholds; and of course the April pension freedoms, which will be providing a lot of the money thatll be feeding into alternative investments any day now.Its a situation where knowledge is going to be at a premium. That goes for advisers as well as their clients. Were featuring an article about the online EIS Tolley Diploma in this issue, and we hope youll think seriously about signing up.

With very best wishesMichael Wilson, Editor in Chief

Michael Wilson, Editor


Another Social InitiativeWere still waiting for the full details of the new Social VCTs, which were confirmed by the Chancellor during the March Budget, and which should be coming into proper existence in the next five or six months. What we already know, however, is that the tax breaks will be broadly similar to those for existing VCTs with some differences in eligible investment quotas and caps.In the meantime, the government has moved to open up the social investment sector further with a 2 million P2P Impact Fund, a pilot scheme which it says will enable regulated social enterprises and charities to capture investment through the thriving crowdfunding market. This isnt a head-on investment for private investors, but is funded instead by the Cabinet Office and run by the Social Investment Business (SIB), which has already invested some 350 million in charities and social projects over the last 23 years.The government says that access to finance is the single biggest barrier for social enterprise to grow and sustain operations. The median amount of finance requested is only 58,000, it says. And thats below the minimum threshold offered by specialist social investment finance intermediaries.The fund, it says, will also help encourage more private investors to get involved with the social investment market, which seeks social as well as financial returns and can benefit a whole range of organisations. Expect to hear more about this in the July interim budget.

News In BriefRound up of the latest industry news

VCT Dividends Up AgainThe 20th anniversary of the creation of VCTs marks a record high level of aggregate dividends being paid. Figures from the Association of Investment Companies show the VCT sector paid out aggregate dividends of 240.3 million over the year to 31 March 2015, compared to 231.1 million in the previous year.The average VCT is currently paying an average yield of 8.2%, which the average generalist VCT yielding 8.8% and the average AIM VCT yielding 5.6%.

The Chartered Institute of Taxation (CIOT) has warned that new restrictions being placed on EIS, SEIS and VCTs could deter investors from taking advantage of reliefs. The measures announced in the Budget include a requirement that all investments are made for business growth and development; that EIS investors are independent of the company at the time of the first share issue; and that total EIS and VCT investment has been capped at 15 million per company, or 20 million for knowledge-intensive companies. Andrew Gotch, chairman of the CIOT owner-managed business committee,

said the qualifying conditions could be off-putting to potential investors and add complexity. The proposed measures include the expectation that potential investors are independent from the company at the time that their first share was issued. However, this may act as a disincentive because it would deny relief where a prospective investor already holds shares in the company, he said. We believe a carve out for existing shares obtained from personal relationship and a de minimis threshold to enable qualification for smaller investment holdings would help mitigate this restriction.

Ian Sayers, chief executive of the AIC, said: As the sector has matured, it is encouraging to see so many VCTs offering consistent and attractive yields. The companies VCTs invest in start small, and as such are high risk, but the tax advantages on offer can be appealing for investors willing to accept the risks.The increase in average dividends paid is one of the many reasons why income hungry investors might want to consider VCTs as part of a balanced portfolio. New Rules, New Confusions?

VCT sector paid out aggregate dividends of

240.3Million

231.1Million

over the year to 31.03.2014

over the year to 31.03.2015


HMRC Decision: Reverse Takeover Loses EIS EligibilityA group of four EIS investors are licking their wounds after a court backed the decision by HMRC to withdraw the tax relief on their EIS scheme, on the grounds that their company had become majority-owned by another company within the statutory three year exclusion period. Even though the takeover company also met EIS eligibility grounds.Confused? Lets start again with the details. The four investors had placed 160,000 in an EIS-qualifying company called PhotonStar LED Ltd during the 2009 and 2010 tax years. But toward the end of 2010 PhotonStar decided to go for a listing on the Alternative Investment Market (AIM). So far, so simple.The trouble was that PhotonStar had opted to achieve its listing by the common tactic of entering into a reverse takeover, whereby a smaller AIM-listed company, Enfis Group Plc, became nominally the 100% owner of PhotonStar. Whereupon HMRC immediately withdrew the income tax relief under EIS - arguing that PhotonStar had breached the Income Tax Act 2007 (ITA 2007), s185 control and independence requirement by becoming a 51% subsidiary of another company within the three-year time period laid down by the legislation.The four appellants had counter-claimed that HMRC had got the wrong end of the stick. Because this was a reverse takeover, they maintained, the reality was that PhotonStar had taken over Enfis, and not vice versa.

In practice, they maintained, Enfis and PhotonStar ought to be regarded as a single body corporate; the fact that they were also producing joint accounts under the PhotonStar ought to have made this plain.But the First Tier Tribunal (FTT) found otherwise. Although it could see what the investors were getting at, it said, allowing this principle would open the door to future uncertainty. Even though PhotonStar and Enfis were effectively trading in the same business with the same management, it would not be permissible for HMRC to treat them as the same company. And henceforth that PhotonStar had indeed become a majority-owned subsidiary of another company, which was why it had been right that the EIS relief was lost. The fact that Enfis had also been EIS-eligible was not considered relevant.The Tribunal, in effect, agreed that its decision was bound to sound harsh on the appellants, but asserted that the law was the law, and it was a matter for the legislature to decide whether the law should be amended to remedy what is perhaps an unintended consequence of the restrictions contained in the existing legislation.What can advisers learn from this? Mainly that its important to keep a watch over changing circumstances. This was a very rare situation, but the inferences are clear enough.

The decision, which may be open to further appeal, can be found at www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=8320

News in Brief

VCTs via TransactTransact has become the first platform to offer VCTs following new legislation.The changes, brought about last year, allow VCTs to be bought by a nominee and still qualify for tax relief. Previously, VCTs could only be bought by investors directly and then transferred to platforms.The first VCTs available on Transact will be Octopus AIM VCT, Octopus Titan VCT and Octopus Apollo VCT. Octopus said demand for VCTs over the past year has hit its highest level in nine years.Shaun Sandiford, head of platform distribution at Octopus, said: With more and more advisers managing their clients portfolios on a platform, and with a growing year-round demand for VCTs, we know it would make a big difference to our advisers if we could get our VCTs on platform.

Horse SenseMore bad luck for a private investor who sank 8,000 into a half share of a racehorse, but who later abandoned the chase after it failed to win races and then sold off his half share in the nag for 500. The First Tier Tribunal dismissed his claim for income tax relief on his loss, which had amounted to 12,316 including training fees. The Tribunal declared firstly that racehorse ownership at his particular level had amounted to a hobby rather than an eligible commercial activity. And secondly, and more importantly, that it wouldnt have paid out anyway, because he was effectively engaged in horse-race gambling rather than a proper trading investment. Since theres no income tax on gambling, it followed that there was no relief to be had on a bet that didnt come off. Hard luck.

Mercia and the Internet of ThingsMercia Fund Management has made SEIS investments into two early stage companies.The fund has invested 150,000 into Kibbi, a smart home security system, and the same amount of seed funding was received by Friendly Score, an online credit profiling company.

Kibbi was a recent finalist for the British Inventor Award at The Gadget Show 2015 and provides an affordable alternative to traditional home security systems.

Mike Hayes, investment director and head of digital at Mercia Fund Management, said: Kibbi is part of a fast-growing industry for the UK the Internet of Things - a fertile ground for start-ups which is predicted by Cisco systems to be worth around 12 trillion by 2020.


sophisticated investors, bitten by the bug for tax-efficient VCTs and EIS schemes, to take a leap into investments designed to make a positive impact on the world?There are many advocates hoping that the social investment sector will take off, delivering the kind of benefits to society, and economies of scale that will make it worthwhile for ethical investors, fund managers and financial advisers.At the time of writing, only 12 SITR schemes have had clearance - including a charity training subsidiary and two social impact bonds that involve joint ventures between a number of charities seeking to relieve the problems of homelessness for

young adults in two different areas of the Midlands.There have been only a few investments so far, but Neil Pearson, an expert in social finance who has worked at not-for-profit organisation Social Finance, believes this will change when IFAs begin to understand their clients can benefit from well-run social investment projects. Social Finance has been a pioneer of social impact partnerships, tackling some of societys deep-rooted social problems, and the introduction of social impact bonds, including one in Peterborough to reduce re-offending among male offenders leaving jail. To date, there are 14 social impact bond schemes in the UK.

Social ReturnsRobin Smeaton, MD of the City Partnership, Looks at the Emergence of Social Investment Tax Relief (SITR) and Asks Whether IFAs are Prepared for the New Funds Helping Good Causes

The big question is, do IFAs really know enough about the implications of SITR and are they likely to steer sophisticated investors?

Rattle the tin, run a marathon, knit a scarf for a jumble sale. Human goodwill and investing in our social infrastructure has been around for generations. What is new on the social investment block is the introduction of social investment tax relief (SITR), which could have a more significant and direct impact on the economic and social landscape of Britain. First announced only in 2013, and coming into force in April 2014, the tax incentives are intended to convince investors to put at least some of their money into projects that will offer the chance of a steady return combined with a wider social benefit.

Whats Involved?The big question is, do IFAs really know enough about the implications of SITR? And are they likely to steer

8 EIS Magazine une 2015

recommendations were adapted into the legislation. The expert group argued that SITRs should have the same benefits as an EIS investment. David Gauke, secretary to the Treasury, and chancellor George Osborne agreed to set the income tax relief for SITR at 30%, the same as EIS. Additionally, investors pay no CGT on disposal of shares in social enterprises. One key difference between SITR and EIS is that under SITR loans may also qualify for the tax relief. While the scheme was given the go-ahead in July 2014, the summer lull meant little was done until September and the first projects launched with the finance happened at the beginning of this year. The one stumbling block was that investment was capped at around 275,000 per social enterprise, due to the EU state aid rules. The chancellor used the Autumn Statement to announce that qualifying organisations could receive up to 5 million of SITR-eligible investment per year, and up to 15 million over an organisations lifespan. However, the proposed increase in these limits remains subject to EU state aid clearance and are unlikely to take effect before the autumn.The expert group also argued that SITR should be available to investors who put money into the social investment equivalent of a VCT, said Neil Pearson. Although this proposal was not taken up initially, the government is now committed to introducing social investment VCTs. These funds, which will operate in a similar format as existing VCTs, will also offer investors income tax relief at 30%. Investors will pay no tax on dividends received from a social VCT or CGT on disposal of shares in social VCTs. Wed hope to see legislation enabling social VCTs to be launched by the autumn.The Opportunities With the potential for bigger investments under SITR, and a wider variety of SITR funds, the major issue is what kind of resources exist to assist IFAs in recommending SITR investments, and who will be able to give proper advice on whether a social investment is a worthwhile opportunity or simply a dead-duck.

Social Returns

George Osborne agreed to set the income tax relief for SITR at 30%, the same as EIS

SOcIAl IMpAcT BOND ScHEMES IN THE UK

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How We Got to Here

The consensus in the fledgling social investment sector is that tax incentives, similar to those for EIS and VCT schemes, are the best way to fuel investor interest. In 2012 the government capitalised the City of London Corporation and Big Society Capital with 600 million to invest in social finance. They commissioned Pearson and Gavin Francis, a former HMRC adviser and the founder of Worthstone, a firm helping to bridge the gap between investors and social enterprises, as well as charity law specialists Bates Wells Braithwaite to write a report on this area.The report, Advising Clients on Social Investments and Deciding on Suitability, helped HM Treasury define the tax-efficient parameters of social investing.A working group then helped oversee the development of the regulations laid down in the Finance Act 2014. Most of the working partys


According to Pearson, the private sector fund managers will not have the expertise in the social investment space, and there is also a question around who can target social investment opportunities, execute those deals and ensure that the investments are being properly run.Bristol: The first SITR-funded project is already up and running in Bristol with the charity FareShare South West, tackling food waste and handing surplus food to vulnerable people. It was set up by impact investment company Resonance and received an investment of 70,000 from a group of angel investors piloting thze new tax rules.At the launch, Daniel Brewer, Resonance managing director, said: There was a strong preference for investing in a pooled social investment fund, rather than directly investing in social enterprises on a deal-by-deal basis. This supports a strategic approach to social impact, ensuring

diversification of risk across a portfolio and reducing the costs of deal structuring for individual projects. This

pilot shows how SITR can channel new finance to growing social enterprises. It can help drive down the cost of much needed capital for social enterprises, while also delivering a risk adjusted return to investors.The deal provides FairShare with access to capital that is affordable and there are no capital repayments in the first three years meaning the charity is able to scale up and concentrate on the task at hand. Resonance is now being sponsored by UBS in the development of SITR funds with the aim of increasing the opportunity for both not-for-profit organisations and investors.

Scotland: Social Investment Scotland, which City Partnership has been providing administrative advice to, is now hoping to launch Scotlands first SITR-qualifying fund. The fund is not being promoted directly by Social Investment Scotland; instead, it is hoping to encourage advisers to identify investors they believe will be interested in social investment.

Getting the IFAs On BoardEncouraging individuals into niche investments is not going to be easy, but individuals are generally receptive to investing in good causes. There is no doubt that IFAs are more comfortable with larger-scale products, and these smaller social investment funds will have to win their spurs to attract a wider fan-base of willing investors.Dont forget either that there is a middle asset class emerging between the red-blooded EIS investor and the philanthropic donors, where people want to invest for a return and tax relief while also generating a social return.HMRC for its part is keen to ensure that SITR and EIS are not confused, but that social investment has a clear direction helping organisations make society a little better. Given time, ethically-minded investors are likely to play their part in a big way. EIS

Social Returns

The first SITR project is already up and running in Bristol with the charity FareShare South West


Getting Down to PracticalitiesHow do Advisers Use Alternative Investments in the Real World? We Sent Michelle McGagh Out To Find Out

Its absolutely right that alternative investments should be primarily seen as a useful addition to advisers tax planning arsenal the tempting tax breaks from EIS, VCTs and SEIS for clients who wish to claw back income tax, receive tax-free income and avoid inheritance tax (IHT) or capital gains tax (CGT). But what of the investment opportunities themselves? How do advisers use these investment vehicles in practice?

There was only one way to find out. We asked some of Britains most eminent advisers for their personal views. What we got back was a wider range of opinion than wed expected.EIS investments provide 30% income tax relief upfront on up to 1 million of investments each year, as long as they are held for three years. But CGT can also be deferred through EIS and eliminated if the investments are held at death, and 100% IHT relief is afforded after two years as long as the client still holds the shares when they die.

The Tax AdvantagesJason Hollands, managing director of Tilney Bestinvest, told us that he uses EIS predominantly to mitigate IHT liabilities for clients. We use EIS principally for two types of tax planning, he said.

The first is to help mitigate an IHT liability via business property relief, which means that it stands outside the investors estate for IHT purposes.

And the second useful role that EIS investments can play in a financial plan is to defer a CGT liability by rolling the gain into an EIS investment. That liability re-crystallises once again when the EIS shares are sold - but ultimately, it can be eliminated entirely if the shares are held on death.

However, EIS are not necessarily the best solution for wealthy investors looking to supplement their retirement income, because the dividends are not paid out tax-free. VCTs might be a better bet, he told us. The main benefit of VCTs is that they pay out gains as income, since the dividends are tax-free, as well as 30% income tax relief a year on up to 200,000 of investments - as long as they are

held for five years. This might suit a wealthier investor looking to supplement pension and ISA income, as the yields are typically very high more than 8% - and they are tax-free.

They are also less risky than EIS - in theory, at least since VCTs are diversified portfolios which typically include a large chunk of liquid, non-qualifying assets.

Since Insley charges for his holistic financial planning service, he charges the same whether I am advising on an ISA or an EIS. If its the right thing for the client, I do not want to be biased. To me, that is part of my job: I should educate people on ISAs and on EIS as well, if it is right for them. Whos Well Suited?Certainly, alternative investments offer generous tax breaks; but advisers are well aware that they are not suitable for all clients.

Danny Cox, head of financial planning at Hargreaves Lansdown, told us that in his experience the average age for taking out an EIS was in the mid-80s, mainly because of the IHT planning benefits. However, he noted the contradiction between the age of the investor and the risk of the investments they are going into.

With EIS you are potentially going into higher risk, illiquid investments, he said which sits oddly with the fact that most peoples appetite for risk reduces as they age.

We do very few EIS, he told us, because you have to find people who have the right appetite for highly speculative, early stage companies. If you have a group of companies in an EIS the chances are that some will go bust you just have to hope the ones that do well make up for the ones that do not.But, he warned us, although EIS are used for IHT purposes, they are not a panacea for inheritance problems. Although tax can be avoided, the illiquidity of some EIS investments can make it

difficult for beneficiaries to get at the money they inherited after the death.AIM shares [which are also exempt from IHT] are more likely to have liquidity, he thought.

Wheres The Market Going? Having heard what the advisers have to say about alternative investments, it was time to go back to the providers and managers for their own views on the subject. Would they disagree? Would they have any special insights into what clients might want? There was only one way to find out.Patrick Reeve, managing partner at Albion Ventures, acknowledges that alternative investments are generally reckoned to be a niche industry thats reserved for sophisticated, high-net-worth individuals; but he believes they will become more mainstream over the coming years as more advisers become aware of the tax breaks and as pension constraints such as next years lowering of the lifetime allowance to 1 million force them to look at alternatives.

Income Or Gains?Mark Insley, managing director of Ascot Wealth Management, believes that EIS can benefit wealthy retirees. If you are [already] earning 45,000 a year from a final salary pension scheme, then you might not want to try and claim back all the income tax you are paying [on the pension income] - but you could claim back the 4,000 a year that you pay 40% income tax on, he said. Insley, whose company also runs a SEIS platform, says that alternative investments are a good middle ground for investors who use the wealth management service but who are not typical angel investors. And some of his wealth management clients who he would not have expected to be interested in alternative investments are now investors.

We have one divorced clientshe has a couple of million from the divorce and we presented EIS to her - she is the person who asked the most questions about it and was really interested.. She has 10,000 worth of investments, and she loved it when she got that payback from HM Revenue & Customs.

If its the right thing for the client, I do not want to be biased. To me, that is part of my job: I should educate

people on ISAs and on EIS as well, if it is right for them.



I think VCTs are going to become a bit more mainstream, he told us. And that is not a bad thing. I dont want them to be mass market, because its a specialist area, but I do think they are robust enough to be widely held. The robustness comes because [the VCTs invest in a] broad portfolio and build up a decent track record with lots of good corporate governance.

Risk and PerformanceReeve adds that advisers should not turn to alternative investments purely for tax planning reasons, but also for the investment opportunities they can provide. There is a logic [to using them for investment] they give access to a different asset class that people would not normally accessa good asset class of growing businesses.

The ideal client is someone who takes a long-term view. Over 75% of our VCT investors are planning to hold on to the investment for at least seven years, and possibly indefinitely, and that is the right attitude.

Simon Ruthers, private client senior manager at Oxford Capital, also reckons that advisers should consider EIS for their long-term investment opportunities, not just for tax planning benefits. If you use EIS as part of a long-term strategy, that diversity [in investment portfolios] is naturally provided, he told us.

Some advisers are using [EIS] solutions as reactive solutions; but there are those at

the other end who are using them proactively, he went on. Those who

are using them reactively are faced with an IHT problem or a CGT problem

[and use an EIS to solve that problem] - it is less around longer term planning and more about

solving the here and now. However, there are lots of advisers who are moving in to using EIS as part of a long-term wealth planning strategy.Ruthers also agreed with Reeve that using EIS as part of an investment strategy was a good way to get exposure to smaller companies that might offer the chance for growth. And he also disagreed that alternatives were automatically too risky for most clients.

Risk should be viewed at a client level, not an investment level, he told us. You could invest in low and medium risk [investments elsewhere] and alongside [those portfolios] have EIS to achieve an overall risk level.And yet not all EIS investments are on the extreme of the risk spectrum, he reminded us. Many EIS funds invest in a blend of higher-risk growth companies and more stable companies. His own preference? We look to invest in

assets that are more stable and [companies with] a more stable and predictable operating model. EIS

What we have found is that there are now advisers coming in to the market who are driven by the fact that they want to save tax because pensions are becoming more challenging, he told us. What we may see a bit more of is people drawing their pension and paying tax, and then reinvesting in to VCTs to give them their tax-free money.

He also likes VCTs as a way to supplement pension income, because of the extremely efficient way that gains are paid out as tax-free dividends. But VCTs should not be used as an alternative to pensions but as an additional route.Advisers should also be aware that VCTs carry higher charges, he told us. For Albions VCTs the upfront charge is 3% and on-going charges are a highish 3% a year, due to the fact that smaller companies have higher overheads.

Getting Down to Practicalities

What we may see a bit more of is people drawing their pension and paying

tax, and then reinvesting in to VCTs to give them their

tax-free money

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Real AssetsEdward Grant, Investment Director in the Client Relationship Team at Ingenious Investments, discusses complementary portfolio planning techniques

The debate surrounding the impact of pension liberalisation rumbles on, and inevitably it has raised the profile of retirement planning options. It has also placed greater focus on creating a blended strategy - and not being reliant on one asset class or solution. Portfolio DiversificationNaturally, clients and their advisers will consider the key pressures in retirement of longevity, inflation, volatility and flexibility, as well as the desire to pass wealth efficiently through the generations. As such, theyll want to consider ways of building in some counter-volatility measures.

Portfolio diversification is at the core of the financial planning process. The traditional asset mix has of course focused on equities and fixed interest; however, the role of real assets within the spectrum has grown, especially since the Retail Distribution Review (RDR) which required independent financial planners to consider the whole market for each client.Uncorrelated AssetsReal assets are generally uncorrelated to the core asset portfolios of equity and fixed interest - which makes them a useful complementary solution for suitable clients. There are a number of real assets available media, clean energy and real estate have been among the most popular, according to the Alternative Investment Report 2014.

For many investors, real assets enable them to directly access growth sectors like the creative industries. Government figures released in January 2015 showed that the creative sector accounted for 1.71m UK jobs in 2013,

or 5.6% of total UK jobs. That represented a year-on-year increase of 1.4% over the longer term (1997-2013), while the number of jobs in these industries increased by 3.9% each year - compared to just 0.6% in the UK economy as a whole. And the UKs creative industries are now worth 76.9 billion per year to the UK economy. Sajid Javid, who is currently Business Secretary but was formerly Secretary of State for Culture, Media and Sport in the last Parliament, put it clearly:The UKs creative industries are recognised as world leaders around the globe and todays figures show that they continue to grow from strength to strength. They are one of our most powerful tools in driving growth, outperforming all other

The UKs creative industries are now worth 76.9 billion per year to the UK economy


sectors of industry and their contribution to the UK economy is evident to all.Investing CreativelyIngenious has been investing in the UK creative economy for the past 17 years, and we find that many investors feel that they are able to relate to media as an asset class and take pride in their association. There is now an established investment track record in media which enables advisers to demonstrate how the trades operate through the cycle of capital raising, deployment of funds and exit on maturity in a timely manner.The Energy AlternativeAs well as media, investors have considered clean energy which has benefited from government incentives on the generation of electricity although, the majority of clean energy assets now sit outside EIS. 2014 was the most successful year to date for Ingenious Clean Energy, with over 60MW of renewable energy generation sites now in operation and a further 15MW in construction. The sites are comprised of 15 ground-mounted solar farms, over 1,900 rooftop solar installations, five wind farms and three waste-to-energy facilities (including two anaerobic digestion plants). Renewable assets generate the predictable, inflation- linked cashflows associated with infrastructure, but are likely to offer a premium to more traditional assets. A direct investment in infrastructure does not have the same exposure to market risk and volatility of listed infrastructure equities. The assets may be suitable for

an allocation within the portfolios of private investors and institutions to assist with their long term investment, asset liability matching and/or retirement planning.Property PicksReal estate strategy is another popular real asset trade which is designed to preserve capital with investments that show low levels of correlation with movements in interest rates or inflation expectations. The onset of the credit crunch resulted in a much restricted supply of credit from banks to residential property developers. An example trade would be a loan to fund the redevelopment of an existing office building being converted into 36 flats.As part of a portfolio, the investor and their adviser will balance liquidity. Its important to remember that real assets are not daily priced funds, and consequently it is important to consider the exit timescales for each investment and the track record of the provider in facilitating an exit in a timely manner.

In summary, when building a diversified portfolio including real assets, the investor and their adviser need to understand the trades being undertaken as part of their due diligence, be clear what the providers track record is and what support is being offered post investment.Nothing contained in this presentation is intended to

be, nor should it be construed as being, investment, legal, financial or tax advice


The Estate Planning ChallengeSimon Ruthers, Senior Manager Business Development at Oxford Capital, Discusses Ways of Reducing IHT Liability

As asset values recover, inheritance tax (IHT) is once again a problem for many clients. While it is probably one of the easier taxes to mitigate, and is widely regarded as a voluntary tax, clients can often suffer from inertia when it comes to estate planning.In the run up to the election, this inertia was further compounded by the uncertainty over how the IHT landscape may change, and that resulted in many clients choosing to defer any planning until the new governments policy is in place.It is a simple fact of life that no one knows when they will die, so any delay could prove financially damaging - and it could be argued that doing nothing is likely to be the worst option, particularly since a delay may ultimately restrict the range of estate planning choices available.During Times of Uncertainty, Flexibility is KeyWhen advisers discuss the subject of estate planning, their clients immediate objections to taking action often include the following concerns: My circumstances may change and I may need access to any capital which would be inaccessible using many traditional estate planning methods Legislation could change in my favour

I cant afford to make gifts

I may need access to capital to pay for care in later lifeWhilst these are legitimate concerns, there is always the chance that they may not materialise, and that the beneficiaries could see their inheritance reduce as a result.

Understanding the OptionsOne of the favoured approaches followed by many families is lifetime gifting. In its simplest form, this could involve a gift direct to the intended beneficiary or, in other cases, it may involve trusts. However, when considering making lifetime gifts, not only do advisers need to ensure that it does not compromise their clients financial security, but also that it will typically take a period of seven years for this strategy to be fully effective. In addition, if the client has lost mental

capacity, the making of gifts become more difficult and, in some instances, impossible.An alternative favoured by many advisers is to arrange for a lump sum to be payable on the clients death by arranging a suitable life assurance policy, held in trust, which to pay any liability. As medical underwriting will need to be completed at the time of arranging the policy, this option is typically only suitable for clients who enjoy reasonable health.Business Property Relief (BPR) - a Compelling Alternative

With the need for flexibility often high on a clients list of priorities, solutions that utilise BPR, including EIS qualifying investments, have been growing in popularity. Not only do these solutions provide IHT savings after just two years; they also allow the client to retain access to the investment should they need it.BPR is available on a range of business assets, including shares in unquoted companies which perform a qualifying trade. It provides relief from IHT to shareholders in the company and is intended to support the establishment of, and encourage investment in new and growing businesses. The relief is available after the shares have been held for two years.Compared to traditional gifting strategies, which often involve the use of trusts, BPR solutions allow the client to make an investment in their own name, rather than necessitating a transfer of wealth. This can be particularly helpful where the client is concerned about having to meet the cost of care in later life.

During times of uncertainty flexibility is key

F lexibility Ability to accommodate a change in circumstances

A ccessibility Full and unrestricted access to capital

S implicity No complicated trusts or medical underwriting

T imelines Freedom from IHT after just two years

This table sets out the key benefits of BpR:

Understanding the Investment OptionsIn its simplest form, an investment in any qualifying business will provide clients with the opportunity to qualify for this valuable relief. However, this is often impractical, and anyway it is a high risk strategy to invest in a single trading company.From a wealth planning perspective, advisers can typically choose from two distinctive investment options:1. A portfolio of growth companies Investing in a portfolio of unquoted trading companies, including those listed on AIM, providing access to smaller growing companies although it is worth noting that not all AIM investments will qualify for BPR. This strategy is typically suitable where investors are seeking the potential for higher returns and are comfortable accepting a high level of risk.2. Investments seeking capital preservation By way of contrast, in response to demand from investors, a number of investment managers have developed solutions that seek to preserve capital, whilst providing the opportunity to achieve a modest return.This option could be appropriate for investors who are seeking a less volatile investment and who would welcome the opportunity for a more predictable return.As each of the options will involve investing in shares in unquoted trading companies, it is important that the client understands the associated risks and for these to be consistent with their risk profile.

Situations for Which BPR Solutions are Well SuitedAs mentioned earlier, investments that qualify for BPR are probably most beneficial for individuals who are looking to maintain control and access to their investments, including a regular income, while also mitigating any IHT liability after just two years.But BPR has other wealth management applications. Some basic examples include the following: Powers of Attorney: Individuals acting under a power of attorney face restrictions when it comes to estate planning, particularly in relation to the making of gifts. Investments into BPR qualifying assets allow attorneys to mitigate IHT, without the need to make an application to the Court of Protection.

Transferring Assets into Trust: Trusts can provide a valuable structure for passing wealth between different generations, often providing protection from divorce, bankruptcy and taxation.Given the benefits that they provide, there are limits on the amount of money that can be transferred into certain types of trust, typically those providing the greatest

flexibility, before having to pay tax. These are typically referred to as relevant property trusts. Although it is possible to transfer amounts up to an individuals available nil rate band, currently 325,000, into these structures every seven years without an immediate tax charge, if a client transfers more, a tax charge of 20% typically applies to the excess.One approach that can be particularly effective is to advise a client to invest into assets that qualify for BPR prior to making the transfer. Once these assets have been held for two years, an unlimited amount of value can be transferred into trust without an immediate tax charge. As normal, after seven years the value of the transfer will fall outside of the estate. Existing Trust: Trustees must ensure that they are

acting in the best interests of the beneficiaries at all times. Trustees have a number of conditions to satisfy under the Trustee Act 2000 and in many cases it may be appropriate to BPR investments , especially where the assets within the trust are treated as forming part of the beneficiaries estate or where the trust is subject to periodic IHT liabilities.

Sale of a Business: On the sale of a business, the owner will lose the benefit of BPR on the sale proceeds (assuming it qualified) and will therefore be subject to IHT. By investing the proceeds into replacement BPR assets, it may be possible to restore this valuable IHT shelter immediately.

Achieving IHT Savings Without Compromising Financial SecurityWhile the objective of estate planning is to ensure a clients wealth ultimately passes to their intended beneficiaries, it is important to ensure that, along the way, they do not compromise their financial security. In an uncertain world, a solution which enables a client to retain access and control over their wealth during their lifetime can provide flexibility that, in the event of a change to IHT, or in their personal circumstances, could be valuable.

There are limits on the amount of money that can be transferred into certain types of trust, typically those providing the greatest flexibility, before having to pay tax

Investments that qualify for BPR are probably most beneficial for individuals looking to maintain control & access to their investments


Twenty Four SevenIFA Magazine, Britains premier online

portal and print publication for

financial advisers, has launched its very

own app designed to help you stay

up to date with all the latest financial

and economic news as it happens. Main Features:

Reviews

Features

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Market and Economics

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IFA Magazine App.indd 1 21/11/2014 09:43


successive Chancellors cheese wire: very small percentage cuts from very large pension funds can make for an attractive and comparatively easy target. The chipping away of pension pots is more of a stealth tax, and its rather easier to administer, than headline-making changes to more mainstream revenue generators such as income tax, VAT and tax credits. It is much more difficult for the people who are unaware of the intricacies of pension taxation to understand and appreciate these changes and, for many, retirement can seem a long way off. As savers may have taken their eyes off pensions, they have been subject to much political interference. Prior to A-Day in 2006, you could contribute unlimited funds into a pension tax-free where they would also roll up tax-free

Augmenting The Shrinking Pension PotRichard Cook, Chief Executive of Blackfinch Investments, Looks at Alternative Ways of Building a Lifetime Pension

As savers may have taken their eye off pensions, they have been subject to much political interference

There are perhaps as many ways to save for retirement as there are ways to spend it but pensions have been the default way of saving for retirement for decades. However, as working practices have changed, with final salary schemes guaranteed by a benign employer falling away, the savings regimes of the prudent might not have adapted to reflect the new reality. More than ever, the financial demands of the here-and-now take precedence over the need to save for a retirement that is perhaps decades away. Stealth TacticsIt has been the long term and static nature of huge pension funds that have made them irresistible for each

(including dividend reinvestment) within the fund. As a tax efficient tool for saving particularly for higher rate taxpayers it was very effective. But over the last 18 years that limitless pot has had the dividend tax relief withdrawn and the lifetime maximum contribution has been been whittled down to 1.25 million, with plans for a further reduction to 1 million from next year.

Twenty Four SevenIFA Magazine, Britains premier online

portal and print publication for

financial advisers, has launched its very

own app designed to help you stay

up to date with all the latest financial

and economic news as it happens. Main Features:

Reviews

Features

Funds

Market and Economics

Trading Expert

FCA

Compliance

Jobs

Co

mp

atib

ility

: R

eq

uire

s IO

S 6

.0 o

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IFA Magazine App.indd 1 21/11/2014 09:43


Compounding Your Way to That MillionSo what does a 1 million pension pot look like when you retire? Bearing in mind that, if you are not prepared to take the longevity risk of flexible drawdown, you are likely to choose an annuity. At present a 1 million pension would probably buy an index-linked annuity of 30,000 a year, with a two-thirds provision for a surviving spouse. That might be insufficient for more affluent pensioners who are hoping to maintain their lifestyle during a period when they might have more time to enjoy the fruits of their labours - and there is going to be an increasing need to supplement pension contributions for those who need more than 30,000 a year in retirement income. Not only do people have to provide more for their retirement: they also have to find places to put those savings. And there are plenty of them.

The point here is that the influence of compound growth will mean that anyone who has accumulated a pension pot of 500,000 by the age of 50 will probably end up exceeding the 1 million limit by the time they come to retire. At a 5% growth rate, the value of money on a nominal basis doubles every 12 or 13 years. Savers who do not plan against this compounding may find themselves uncomfortably brushing up against the 1 million limit beyond which there is 55% tax to pay on the overspill, and which, once exceeded, allows no last minute redress. As for that 500,000 pot at 50, it might be more possible than it sounds. Assuming modest levels of compound growth, even a 12,000 a year contribution from your early 30s onward should leave a person with 500,000 by their early 50s, despite having only contributed less than half that amount. So the message is clear for pension saving: save early, save often, but dont overdo it - because if you do, the tax charge will really hurt.

Augmenting The Shrinking Pension Pot

So the message is clear for pension saving: save early, save often, but dont overdo it because if you do, the tax charge will really hurt

12,000a year

Assuming modest levels of compound growth, by

contributing just

Early 50s500,000

Early 30s

The benefits of the repeated tax break become more attractive when compared to the potential uncertainty of the underlying growth

Alternative MeasuresAnd this is where we get to the nub of the matter. So what kind of alternative investments may be available to those wishing to save for retirement? Well, EIS is an obvious candidate for supplementing the pension pot. The secrets in the three year holding period.One of the EIS systems key advantages over a pension is that an investor can re-target his investment from one EIS to another every three to four years. Whereas pensions only offer a one-time tax break, recycling your EIS investment in this way makes it possible to take advantage of the 30% income tax relief perhaps as many as seven times during a 25 year period. What is more, the shorter the timespan of investment, the less susceptible the investment is to fiscal attack by the government during the investment period. While the underlying activities that qualify for EIS can change, EIS as an investment vehicle has had a solid track record in this country. The additional tax advantages, such as capital gains deferral, loss relief and inheritance tax relief, provide additional benefits to a wide range of investors. And there is a range of risk/reward profiles, including some which will suit investors with a capital preservation focus. Advanced assurance from HMRC that an activity qualifies for EIS also helps provide peace of mind before each investment is placed.


The Tax Break Versus the RiskOf course, like any investment strategy, saving for retirement should make use of all the alternatives. At present, most investors take a twin-track approach to raising their retirement cash firstly, through the principal primary residence, which is then released upon downsizing and secondly, though ISAs which provide a convenient and effective tax wrapper to shelter capital gains.An EIS has a much larger annual saving capacity, of course, as well as the same capacity for tax-free growth. However, even if growth is set aside, its the compounding of that 30% tax break when an EIS investment is recycled that makes it so compelling. Lets try to assess the value of that 30% initial tax break. Remembering, of course, that like any investment, EIS or otherwise, the higher the projected return, the more risk one should presume. Most pension companies are modelling the returns on mainstream equity portfolios somewhere between 5% and 7% per annum on a compound basis. But with an EIS, the tax advantages of recycling the capital in an EIS every three to four years should deliver a 10%+ return before any growth (or shrinkage) is taken into account.Asset-Backed InvestmentsOne key aspect to look out for when choosing an EIS to augment pension savings is to look at business models, and particularly at their relation to a

capital preservation strategy. Such a strategy would look for stable returns through activities that can be measured, and that are more predictable. This is often the case with a structured EIS that relies on an asset-backed investment, or one with a high proportion of pre-contracted revenue streams. To take full benefit of the

characteristics of EIS, it is the ability to reinvest after the minimum hold period, thereby triggering a further tax relief, which holds the key for this model. The ability for both the adviser and the investor to understand the cash flows of the underlying activities will be paramount.

EIS opportunities that back more volatile investments can have less foreseeable revenue streams; such as the young tech start-up company with the ambition to design the next big thing. Such grand ambition with higher associated risks might reap greater returns; however, as an investor the timescale of this cannot be foreseen - it could happen in one year or in 10, or not at all; so the lack of predictability should always be considered. It is the ability to realise those funds and reinvest in another EIS at regular intervals that creates the opportunity to compound the significant tax reliefs over time; thus, the benefits of the repeated tax break become more attractive when weighted against the potential uncertainty of the underlying growth.

Moving Away from EnergyWhile the EIS sector remains a broad church in terms of risk and underlying activities, it can be seen that over the last five years that the mainstay for structured EIS investment has been the renewable energy sector. Now, however, the renewable sector has matured and appears able to source funding from non-tax advantaged sources; and accordingly it has been ruled out as an EIS-qualifying activity. But there are still viable and attractive opportunities to be found, albeit in a smaller market. The Way AheadAny further reduction to the size of pension pot will create further demand. Time should be taken to thoroughly investigate the underlying business models as this will be key in regards to the investors ability to successfully exit and reinvest. This timeliness of reinvestment can make all the difference in order that the compounding of the tax breaks can be maximised. So yes, well agree that pension saving may become more complicated in the future; but with EIS, itll be many times more effective.EIS

Augmenting The Shrinking Pension Pot


Get Up To Speed - Get TrainedThe Tolley EIS Diploma is an Online Fast Track to Mastering the EIS System, Says Mary Rodgers, EISA Membership Manager. Can You Afford Not to Sign Up?

In the two decades since the launch of EIS the market has grown to over 1 billion a year, and approved applications for the initiative are currently at record levels. Not only are EIS and SEIS legitimate tax planning tools, but they provide a key means of channelling much needed equity capital into early stage and developing UK entrepreneurial companies. This investment fuels innovation and growth in employment and is vital for the growth of the wider economy. As Sarah Wadham, director general of the Enterprise Investment Scheme Association (EISA), puts it:

Given that we are seeing increasing levels of interest and investment into EIS qualifying companies and funds, it is vital that financial advisers and wealth managers are fully aware of how EIS operates, including the ways to invest in EIS companies and funds and which investors these investments are appropriate for.

The EIS DiplomaThe Enterprise Investment Scheme Diploma has been developed by the EISA in conjunction with Tolley Exam Training to provide financial advisers with the knowledge and skills they need to advise clients with confidence in this rapidly growing area of investment. The EIS Diploma is an on-line, self-study diploma covering all aspects of EIS, including the tax implications, regulatory aspects and the wider funds and schemes landscape. It demonstrates effective ways to utilise investments efficiently to maximise the benefits in an easy to understand manner.

How Its StructuredThe EIS Diploma is presented in a modular format split into four manageable chunks. There is a test at the end of each module which candidates must pass in order to progress to the next module. This method provides candidates with the flexibility to work at their own pace. Candidates must pass all four modules before being eligible

to take the final full EIS Diploma exam. There is no limit on the number of times a modular test can be re-taken.The final EIS Diploma exam is a 60 minute online test consisting of 30 multiple choice questions, and covers the full syllabus. There is also a full syllabus mock in

preparation for the final exam. Both are available from the Tolley Online Exam Centre so candidates have complete flexibility to sit them at any time. It is only permitted to take the final exam three times and these attempts must be within two years of passing the fourth module of the course.

In the two decades since the launch of EIS the market has grown to over 1 billion a year EIS marketworth 1

Billion A

year


BE FIRSTOVER THELINE

Course MaterialsAnyone studying for the EIS Diploma will receive a comprehensive study manual with useful summaries to aid understanding, plus practice examples, many of which are in the multiple choice format that will be seen in the final exam.

The manual is divided into five chapters and is expected to require ten hours of study time. The chapters cover: Introduction to EIS

Introduction to the UK taxes income tax; capital gains tax (CGT) and inheritance tax (IHT) The tax reliefs income tax/CGT/IHT and loss relief for both EIS and SEIS EIS funds

Regulation on EIS investments

What Else?Students also receive: Access to the Tolley Online Academy, also available as an app, which provides access to all study material, plus audio-visual lectures and student forums Full support from the experienced tutorial team

Access to the Tolley Online Exam Centre for all the EIS Diploma and mock exams. The mock is representative of the final exam testing environment providing ample familiarity and practice to aid a first time pass

Upon passing, an EIS Diploma certificate accredited by the EISA 15 hours of CPD

Testimonial

The first candidate to obtain an EIS Diploma was a financial planner specialising in EIS. His comments?The diploma is very relevant to my work and provides an external reference point. Having a benchmark and the opportunity to widen your skills are always useful. That all made studying for the Tolley EIS Diploma attractive. By gaining the Tolley EIS Diploma I believe advisers will become more confident in explaining this type of financial planning to their clients, and it could prove a good business opportunity by building up their high net-worth client base.

Cost and DiscountsThe EISA Diploma Course costs 335 (including VAT). This includes the 50 registration fee, examination fee and EISA accreditation. A discount is available for groups of more than 10 people from a single firm who register at the same time. The discounted rate is 280 (including VAT). This includes the 50 registration fee, examination fee and EISA accreditation. Successful candidates are invited to apply for EISA Affiliate status for an annual fee of 100.

About EISA The EISA is the trade body for the EIS and SEIS industry. Its members are the EIS and SEIS funds as well as lawyers, accountants and corporate financiers who advise both the companies seeking investment and the investors.The EISA maintains close relationships with the Treasury and HMRC and the FCA to ensure that the EIS and SEIS reliefs work effectively to support small and growing businesses. EISA Affiliate benefits include updates on the Associations Spring and Technical Seminars, and notifications of any changes to regulation or legislation which happen during the year.As part of an ongoing remit to encourage and recognise excellence and professionalism in the industry, the EISA also recently re-launched the highly prized EIS and SEIS Awards, which are judged by independent outside judges against set criteria. The EISA has also launched a new initiative aimed at younger professionals in the industry, Green Shoots, which provides networking opportunities and encourages greater links with entrepreneurial companies seeking investment.

For more information on studying for the EIS Diploma please visit tolley.co.uk/eisdiploma, email [email protected] or call 020 3364 4500.For more details on the EISA, the Tax Reliefs and the Diploma, please visit the EISA website: www.eisa.org.uk or email: [email protected]

New X-Wind Offeringand Peto Progress

Mackinnon has announced a new offering for its X-Wind project and progress for its current operation with Peto, a marketplace for the public sector that is working with Barts Health.

About MackinnonsEstablished in 1997 by Iain Mackinnon, Mackinnons specialises in corporate finance advisory, wealth management and merchant banking with particular expertise is the renewable energy and health sectors. X-WindX-Wind has developed a ground-breaking Vertical Axis Wind Turbine aimed at the medium scale renewable energy sector, says Mackinnon. The team has drawn on its extensive experience gained developing the worlds largest wind turbines at Dutch-company Vestas. Since its launch in 2012 X-Winds core patented technology has won five high-profile technology awards.X-Winds visible sales pipeline exceeds 40 million and the company is currently securing commercial commitments for its 80kW turbines from customers in need to secure energy pricing and supply, including securing a partnership with the UKs largest electricity user. To date

X-Wind has raised 1.7 million in grants and 300.000 of equity. X-Wind currently requires 2 million of equity funding to complete the production of its first full-scale 80kW turbine.Barts Health Open OfferingMackinnon is working with portfolio company Peto Limited, which aims to bring transparency to staff procurement through its public sector marketplace. Peto was appointed in September 2014 to support the Barts Health in the delivery of savings from the off-contract spend of around 38 million per year. Five months into service delivery the Peto team, are achieving 12% realised savings against a target of 4% on prior spend. Mackinnon said this is a strong result and is reinforced by huge opportunity to increase the scope of the throughput which has been lower than forecast to date.

Peto chief operating officer Mike Holdcroft said: We are thrilled with results we are achieving at Barts and look forward to collaborating with the team to achieve even greater savings in the future. Details fromTom Death [email protected]

www.flickr.com/photos/archer10/498028556624 EIS Magazine June 2015


With rising property prices, inheritance tax (IHT) is a problem that is no longer just affecting millionaires but most of middle England; so whats the best way to mitigate it. In 2014/15 HM Revenue & Customs collected IHT receipts of 3.8 billion, up 11.6% on previous years. This figure is set to rise as the current nil rate band (NRB) threshold of 325,000 has been frozen until 2018 while Nationwide is reported an 11% rise in house prices in the year to August 2014, and the soaring property market shows no signs of abating thanks to a number of government initiatives to get people on and up the property ladder. While a rising house price may be a comforting thought, when it comes to estate planning it can be a hindrance as more families find themselves passing on an IHT bill to their loved ones. So, what can people do to mitigate the cost of IHT for their families? There are a number of options and they have typically been used in the following order: gifting, whole of life insurance, loan trusts, discretionary gift trusts and business property relief (BPR).

You can see from the following traffic light chart that each method has its own pros and cons, but BPR which has considerably more positives is often used as a last resort after more traditional methods of reducing an estate.

Adding Value ThroughEffective IHT Planning

Gifting

Access Speed Simple Control Cost

WOL

Loan Trust

DGT

BPR

Time Investment traffic light system reveals the multiple benefits of utilising business property relief when reducing an estate


What is BPR?BPR was introduced in 1976 to allow owners of small businesses to pass business assets to beneficiaries without paying IHT. It works by reducing the value upon transfer of certain types of qualifying assets by 100% after a two-year period of ownership. The two year clock can be completed between spouses or civil partners. BPR is available for lifetime transfers or for relevant business property included in an individuals estate on death.Where is the money invested?In order to qualify for BPR assets are invested in a number of assets. For example, Time Investments put money into solar energy, wind energy, secured property lending and self storage. The managers target predictable, asset-backed income generating assets on a minimum investment of 25,000.Time Investments aims for an uncapped target return of 3.5% and focuses on capital preservation. There is an independent custodian to hold investors money and assets and an independent advisory committee.

Charges are partially waived on death within the first two years.

Who can benefit from BPR?BPR solutions are suitable for a number of clients which Time Investments categorises as asset growers, asset rich and asset givers.What to consider when reviewing BPR?There are a number of factors advisers need to consider when choosing a BPR solution to suit a clients needs: Liquidity

Underlying investments

Asset backing

Gearing

Providers track record

Fees

Extacting profit from a company

Asset Growers Asset Rich Asset Givers

Power of Attorney (POA)

New Discretionary Trusts

Preserving trading status within a company

Neutralising income tax Sale of business of farm

Capital gains pregnant assests

Trusts for Life Tenants

Pension supplement Large investment bonds

Free ISAElderly client ISA portfolios

Deferring a Capital Gain

Adding Value Through Effective IHT Planning

Tuesday 30th June 2015London. The capital club

This extended seminar will examine the basic features of the exchange traded funds market and will discuss the choices and strategies available to advisers when select-ing funds on behalf of clients. Essential knowledge!

Registration is free - Full details at http://tinyurl.com/pnqekyy

ETF Masterclass for AdvisersAn Adviser Seminar on ETFs from IFA Magazine and EIS Magazine. Opportunity for advisers to get face-to-face access with some of the leading tax efficient investment managers in ETFs.


Open Offers SEISEIS VCT SITR IHT BPRInvestment Key:

Kuber Ventures Multi Manager PlatformKuber Ventures Multi-Manager EIS Platform, has a range of portfolios which areeach diversified across a number of fund managers. Through a single applicationand depending on the portfolio selected, our portfolios allow investors to create adiversified spread of up to 40 qualifying EIS investments.

Investors may select individual funds or choose to achieve further diversificationby investing in one of the Kuber portfolios available. Seed EIS strategy (fund of two funds) Media strategy (fund of five funds) Long term investment strategy (fund of 5 funds) Asset focused strategy (fund of 6 funds) Seed and early stage growth strategy (fund of 3 funds) Mature growth strategy (fund of 4 funds) Diversified growth strategy(fund of 7 funds)

Kuber Ventures

Minimum Investment: 20,000

OpenNow

CloseEvergreen

EIS

T. 020 7952 6685E. [email protected]

www.kuberventures.co.uk

The Imbiba Leisure EIS Fund is the latest investment opportunity from the highly regarded and award winning Imbiba team. The second tranche is now open and will be investing in Wright & Bell and up to three further bar/restaurant concepts. Wright & Bell marks the return to the City of the Imbiba team following their highly successful exit from Drake & Morgan two years ago, which delivered a return to investors of 5.7 x cash (before tax relief), and for which they won the prestigious Best Exit award from the EIS Association in February 2014.The Imbiba team has a long and successful track record of launching and developing businesses in the leisure and hospitality sectors, successfully generating significant returns to their previous investors. Offer details: Significant investment of up to 200.000 per investee company from both the Imbiba team and Enterprise (EIP) Maximum subscription is 25m of which over 5m has been raised already Target base case return: 2.34 for each net 70p invested which is an IRR of 33% Industry leading management performance hurdle rate of 1.50 per 1 invested


www.enterprise-ip.com

Enterprise Investment Partners The Imbiba Leisure EIS Fund

Amount to be Raised: 15m

Open06/04/2015

Close30/09/2015

EIS

T. +44 020 7478 0901E. [email protected]

www.wine-eis.com

Amount to be Raised: 4m

OpenNow

Close31/12/2015*

EIS

An asset-backed investment combining the asset class of fine wine and its distinctive investment characteristics with the tax advantages of EIS. The Company has been successfully trading fine wines since 2012 and, since already trading as an EIS, can issue EIS3s promptly.The investment team, with 60+ years combined wine investment track-record, has a proven, disciplined trading methodology, is fully independent and contains a unique blend of wine market knowledge, financial market background and analytical ability. Wine stocks are bought and sold through counterparties worldwide, are stored in UK government bonded warehousing and are insured at replacement value. The market is currently well below trend and its long run tendency to outperform more traditional asset classes remains unchanged. Fine wine as an asset class has outperformed equities, gold and oil over the last 21 years, with lower volatility, therefore also offering risk reducing portfolio diversification.*Closing rounds 30 June, 30 September, 31 December 2015Minimum investment 10,000 and 3% available to intermediaries.

The Wine Enterprise Investment Scheme Limited


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Peto reports 12% savings at Barts HealthPeto was appointed in September 2014 to support the Trust in the delivery of savings from the off-contract spend of around 38million per year. Five months into service delivery the Peto team, are achieving 12% realised savings against a target of 4% on prior spend. This is a strong result, reinforced by huge opportunity to increase the scope of the throughput which has been lower than forecast to date. Peto has been working with Barts Health procurement team, budget holders, and the Peto marketplace, peto.co.uk.About Peto Active in over 200 NHS trusts, Peto connects public sector buyers and private sector sellers via an easy-to-use online marketplace, and where necessary, with additional resources to reduce spend via its insourcing procurement service. T. 01983 282925E. [email protected]

www.peto.co.uk

Peto - One To Watch

Amount to be Raised: TBc

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EIS

Octopus Eureka EIS is a discretionary managed portfolio that aims to provide investors with a broad range of tax benefits by investing in EIS-qualifying early stage UK companies. The diverse portfolio of companies, across a range of industries and sectors, offers the potential for higher investment returns over the long-term (more than five years) when compared with portfolios of FTSE 100 companies.

A unique investment approach: Octopus Eureka EIS clients typically hold a portfolio of at least 15 EIS-qualifying companies. These may be either unquoted companies or companies that are already listed on the Alternative Investment Market (AIM), part of the London Stock Exchange.Investments in unquoted companies are managed by the Ventures team at Octopus, which specialises in investing in fast-growing unlisted companies. The Ventures team includes investment professionals from a wide variety of backgrounds, including former entrepreneurs, professionals, academics and industry experts.Investments in companies listed on AIM are managed by the Octopus Smaller Companies team. They look after AIM mandates worth more than 620 million, across a range of Octopus products. T. 0800 316 2067E.salessupport@octopusinvestments.comwww.octopusinvestments.com/eis

Octopus Eureka Enterprise Investment Scheme Portfolio Service

Amount to be Raised: Unlimited

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EIS

Rockpools EIS Portfolio Service offers an alternative to traditional EIS funds. Rockpool creates direct private company investment opportunities for its network of members which includes hundreds of successful entrepreneurs and professionals from a wide range of business sectors. Deals created for the network are also open to a wider audience of investors through Rockpools EIS Portfolio Service. Rockpool targets companies which are profitable or have significant asset backing. Asset backed sectors include crematorium operation, electricity generation, construction project delivery, managed storage services and childrens nurseries.Rockpools model offers full transparency and control with meet the management sessions, regular updates, investment reviews and an on-line portal. There are two ways to access the service: Self-select - the investor selects which companies to invest in with a minimum of 10,000 per company Discretionary service Rockpool selects the companies to match the investment strategy of the investor. Minimum investment of 10,000 which will be spread across a number of companies.


www.rockpool.uk.com

Rockpools EIS Portfolio Service

Minimum Subscription: 10,000

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EIS


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Through the Oxford Capital Growth EIS, investors can build a portfolio of shares in six to ten small or medium-sized British companies over a period of roughly 12 months. Each investment should be eligible for EIS reliefs, including 30% income tax relief and tax-free gains. Investee companies could be operating in a wide range of industries past investments have spanned sectors from digital marketing to sustainable agriculture but they will all be businesses that have potential to grow rapidly. Oxford Capital works closely with the investee companies, helping to accelerate commercial development with the aim of achieving a profitable exit, usually through either a trade sale or a stock market listing. The Oxford Capital Growth EIS targets a return of 2.5x the amount invested (net of applicable fees and including the impact of EIS income tax relief), aiming to return the majority of proceeds four to six years after initial investment.

Through the Oxford Capital Infrastructure EIS, investors can benefit from EIS tax advantages including 30% income tax relief and tax-free gains, by acquiring shares in one or more EIS-qualifying companies that own and operate infrastructure assets. Oxford Capital aims to invest in companies capable of generating stable revenues through long-term contracts, producing returns of 1.10-1.15 per 1 invested (net of applicable fees and not including the impact of EIS income tax relief). Shares are normally purchased for the investor within four to six weeks of submission of their subscription. EIS3 certificates are available on average 12 months after purchase of shares. Oxford Capital will aim to sell the shares to a strategic acquirer and return capital to investors after the fourth year of the investment.

T. 01865 860760E. [email protected]

www.oxcp.com


www.oxcp.com

Oxford Capital Growth EIS

Oxford Capital Infrastructure EIS

Amount to be Raised: No Max

Amount to be Raised: No Max

Min Investment: 25,000


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EIS

EIS

The Par Syndicate EIS Fund is an evergreen EIS fund, unapproved by HMRC, investing in innovative high growth potential companies with a view to generating capital gains. The fund, managed by Par Fund Management Limited, made its first investment in December 2012. The funds mandate is to invest alongside (and on the same terms as) business angel syndicates, and usually, but not exclusively, co-invests with the Par Syndicate, a leading business angel syndicate that has been investing since 2009. To date, 1 million has been invested in eleven companies through the fund, as part of overall funding into these companies of over 10 million. The strong flow of investment opportunities arising from close collaboration with business angel groups is evidenced by the fact that the fund made six new investments in the last tax year. The fund may be promoted to retail investors under COBS 4.7.T. 0131 556 0044E. [email protected]

www.parequity.com

Par Syndicate EIS Fund


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The Triple Point EIS service targets investments across a range of sectors including infrastructure and construction.The investment strategy has been shaped by our extensive and successful experience managing EIS qualifying investments, where we adopt a cautious and meticulous approach to managing investors capital without losing the ability to capture growth opportunities. This enables the service to target returns in excess of 10% per annum, taking into account the initial income tax relief received by investors, and to target transparent exit strategies which are designed to facilitate an exit for investors after three years.


www.triplepoint.co.uk

Triple Point EIS Service


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The Deepbridge Technology Growth EIS represents an opportunity for investors to participate in a portfolio of actively-managed growth-stage technology companies, taking advantage of the potential tax benefits available under the EIS. The Deepbridge Technology Growth EIS is a diversified portfolio of actively managed high-growth companies seeking commercialisation funding. The Deepbridge EIS invests in companies that have a proven technology, clear intellectual property and are operating in a high growth/high value market sector. The Fund is focused on investing in high growth companies that are seeking to commercialise and expand, specifically in three sectors: Energy & resource innovation; including waste water treatment and conservation, advanced materials and renewable energy generation technologies; Medical technology; such as medical and surgical instrumentation, devices and diagnostics; IT-based technology; particularly Enterprise Application Software and Software as a Service. The target return for the Deepbridge Technology Growth EIS 22.9% p.a. over a minimum of three years; representing mid-case capital growth of 160p returned for every 100p invested. To ensure maximum tax efficiency for the investor, the Deepbridge EIS is entirely investor-fee free at point of investment. T. 01244 893182www.deepbridgecapital.com

Deepbridge - Technology Growth EIS


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EIS

The MMC Ventures EIS Fund offers investors exposure to a portfolio of hard-to-access, fast growing private companies, combing real capital upside potential with generous EIS tax reliefs. Founded in 2000, MMC is regularly rated as one of the top 5 most active venture investors in the UK, investing circa 20 million per annum in a combination of new deals and follow-on capital for existing portfolio companies. An investor in the MMC EIS Fund can expect a portfolio of eight to ten companies within twelve to fifteen months of subscribing. The MMC EIS Fund is categorised as a generalist product but has a clear investment focus on technology-enabled sectors where the UK is a world leader - particularly financial and business services, business software, digital media and e-commerce. MMCs fundamental approach is to invest on the commercial merits of each transaction, viewing the EIS tax benefits as highly desirable but not the reason to invest. This approach is reinforced by their policy of co-investing their EIS Fund alongside other funds they manage that do not qualify for EIS tax relief. T. 020 7361 0212E. [email protected] www.mmcventures.com

MMC Ventures - EIS Fund OpenNow

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EIS

Minimum investment: 25,000


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www.blackfinch.co.uk

Minimum Subscription: 25,000

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EIS

X-Wind has developed a ground-breaking Vertical Axis Wind Turbine aimed at the medium scale renewable energy sector. The team has drawn on its extensive experience gained developing the worlds largest wind turbines at Vestas. Since its launch in 2012 X-Winds core patented technology has won five high-profile technology awards.X-Wind visible sales pipeline exceeds 40 million. The company is also securing commercial commitments for its 80kW turbines from customers in need to secure energy pricing and supply. X-Wind has secured a partnership with the UKs largest electricity user. To date X-Wind has raised 1.7 million in grants and 300,000 of equity. X-Wind currently requires 2 million of equity

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