Private Equity

Question 1

Venture Capital Trusts (VCTs)

Answer 1

Listed company run by fund managers

Investment made by subscribing for new shares when trust launched or buying shares once trust established

Investors able to spread risk over number of unlisted companies

30% income tax relief on investments up to £200,000

Relief withdrawn if held less than 5 years

Dividends exempt from income tax

No CGT deferral available

No CGT on disposal

Losses not allowable for CGT purposes

Question 2

Main VCT Qualifying Conditions

Answer 2

Listed on stock exchange

Income wholly/mainly derived from shares or securities

At least 80% of investments in qualifying holdings

No more than 15% of total investments in single company

Fewer than 250 full time employees (500 for knowledge intensive companies)

At least 70% of qualifying holdings to be in new ordinary shares with no preferential rights

Investments linked to a share buy-back, or made within six months of a disposal of shares in the same VCT, are excluded from new tax relief

Question 3

Enterprise Investment Scheme (EIS)

Answer 3

Intended to help certain types of small, higher risk unquoted companies raise capital by providing
tax relief for investors

30% income tax relief on investments up to f2m (but anything over f1m must be in knowledge
intensive companies)

Income tax relief given in year of assessment when shares are issued

Relief withdrawn if shares disposed of within 3 years except to a spouse and not on investor’s death

Able to carry back relief

Able to defer CGT gain by re-investing into EIS

If shares held for 2 years, then qualify for 100% Business Relief

Question 4

Main EIS Tax Relief Conditions

Answer 4

Qualifying individuals subscribing for qualifying shares in a qualifying company

Qualifying individual is someone not connected with company when subscribing

Eligible shares are new ordinary shares not redeemable for at least 3 years

Qualifying company must be unlisted when shares issued

Fewer than 250 full time employees (500 for knowledge intensive companies)

Gross assets bélow £15m before issue of shares and £16m after

The company must have raised no more than £5m in the previous 12 months

Question 5

Seed Enterprise Investment Scheme (SEIS)

Answer 5

Focuses on smaller early-stage companies carrying out a qualifying trade

Income tax relief 50% up to £100,000

CGT exemption on 50% of gains invested in SEIS shares

Can carry back CGT and income tax relief

100% Business Relief after 2 years

Question 6

SEIS main conditions

Answer 6

Be unquoted at the time of issue of the shares

Employ 25 people or less

Be no more than 2 years old

Have less than £200,000 in gross assets

Companies benefiting from subsidies from the generation of renewable energy cannot also benefit from SEISs