Private Equity

Question 1

Name 3 types of Private Equity Investment

Answer 1

1. EIS - Enterprise Investment Scheme
2. SEIS - Seed Enterprise Investment Scheme
3. VCT - Venture Capital Trust

Question 2

Conditions for EIS

Answer 2

1. New ordinary shares
2. Unlisted when shares issued
3. Qualifying Trade
4. < 250 Employees (500 for Knowledge intensive companies)
5. Assets <£15 million before and <£16 Million after issue
6. Not raised more than £5m via EIS

Question 3

Explain the Tax relief of EIS

Answer 3

1. 30% Income Tax Relief (tax reducer)
2. Up to £1 million invested (£2m for knowledge intensive companies)
3. Must hold 3 years or clawed back
4. Can carry back relief to prior year
5. Can claim reinvestment relief to defer gains on purchase of EIS (1 year before, 3 years following investment)
6. Business relief (IHT) if held 2 years

Question 4

Conditions for SEIS

Answer 4

1. Unquoted
2. Qualifying Trade
3. <25 Employees
4. < 3 years old
5. <£350,000 assets
6. <£250,000 raised

Question 5

Tax Relief of SEIS

Answer 5

1. 50% Income Tax Relief
2. Max inv. £200,000
3. Must be held 3 years or clawed back
4. Can carry back relief to prior year
5. 50% of a reinvested gain is exempt
6. CGT free if held 3 years
7. Business relief if held 2 years

Question 6

Conditions for VCT

Answer 6

1. Listed on LSE
2. All money raised within 2 years
3. Income wholly or mainly derived from shares
4. 80% of investments in qualifying holdings (new shares, unlisted companies)
5. Max 15% of holdings in 1 company
6. 70% of holdings must be ordinary shares
7. Not raised more than £5 million in last 12 months - Qualifying holdings

Question 7

Explain Tax Relief of VCT

Answer 7

1. 30% Income Tax Relief
2. Max investment £200,000
3. Dividends upto £200,000 p.a - tax free
4. Capital Gains Exempt on disposal
5. Must hold 5 years or IT relief clawed back