Private Equity Flashcards
Describe enterprise investment schemes (EIS)
Investment in a single company. With tax benefits, if rules are met, such as the size of the company and assets held.
Describe tax for EIS.
Up to 1m can be invested and receive 30% tax relief as a deduction from tax bill.
Can be carried over from the previous year.
1m increased to 2m if the excess over 1m is invested in knowledge intensive companies. (10% cost into R&D, inviting intellectual property, and/or has skilled full-time staff.
Gains on other investments can be deffered if reinvested into EIS.
100% business relief for IHT if shares held for 2 years.
What are the rules for tax breaks on EIS?
The company must have no more than 250 employees on the date shares were issued. (500 for knowledge intensive)
No tax relief is given if more than 30% of the capital is aquired - though CGT mat still be claimed.
Gross assets of the company must not exceed 15m immediately before the issue of the shares or 16m after.
The company must not have raised more than £5m (£10 knowledge intensive) under all venture capital schemes for the 12 months until the investment day. And £12m (20 KI) in its lifetime.
Investment must be made within 7 (10KI) years of companies’ first commercial sale unless investment is more than 50% the last 5 years turnover.
Subsidised energy companies have not been acceptable since April 2015.
Must meet capital at risk requirement. (Growing and investment is at risk)
Do EIS pay dividends?
Generally not.
What is a seed enterprise investment scheme (seis)
Similar to an EIS but goes further for tax breaks and smaller businesses.
How much can you put in a SEIS and what is the tax?
£200000pa
50% tax exemption
Can be used for CGT writes off the 50% rather than deffers
IHT business relief is available after 2 years
Investment must be kept for 3 years in order for relief to be locked in.
What are the rules for SEIS
Must be unquoted
Cannot employee more than 25 full-time equivalent staff
No more than 3 years old and have less than £350000 before the ivestment is made.
The company can not be engaged in precluded trade- finacial services, property development, and dealing in commodities.
What are venture capital trusts (VCT)?
Collective investments in small companies offering diversification.
Reduced risk but still has good tax breaks.
How much can be invested, and what is the tax for VCT?
£200000pa
30% tax relief clawed back if sold within 5 years
No CGT with no minimum years held.
No rollover from other investments
No tax on dividends.
What are the rules for VCT
Must be listed on stock exchange
All money raised must be employed within 2 years
No more than 250 employees on date shares were issued
Must not have raised more than £5m under venture capital schemes in 12 months up to date of investment (£10m KI)
VCT must not retain 15% of the income it makes
