EIS & VCT Factors to Consider when investing

Question 1

Income Tax

Answer 1

• Investment will reduce IT liability by 30% of the amt invested, subject to not exceeding the tax payable in the relevant tax year
• Relief lost if EIS disinvested within 3 years and if VCT within 5 years
• Could use EIS to reduce IT liability for previous tax year (carry back)
• EIS not usually pay income but if does will be taxable, Divis from VCT will be tax free and will reduce amount of IT to pay

Question 2

CGT

Answer 2

• Any gains from dis investing the Investment portfolio can be deferred if invested into EIS
• All gains in VCT are immediately exempt from CGT, whereas gains in EIS are exempt after 3 years

Question 3

IHT

Answer 3

• EIS shares qualify for 100% BPR two years after issue whereas VCT will always be in the estate

Question 4

General

Answer 4

• do clients have sufficient investable wealth / CFL
• EIS and VCT are higher risk investments
• EIS is less liquid than VCT
• both should be considered as longer term investments