Tax releived alternative investment schemes

Question 1

How is a venture capital trust listed?

Answer 1

Publically listed on an exchange

Question 2

What do VCTs invest in?

Answer 2

Small companies which are not listed on stock exchanges

Question 3

Why are tax benefits given to VCT investors?

Answer 3

Encourage investment in smaller companies
Compensate for the increased risk of investing in these companies

Question 4

Who cannot claim tax relief on VCTs?

Answer 4

• <18 Years old
• Trustees
• Companies

Question 5

What is the income tax relief on a VCT?

Answer 5

30% up to £200,000
Cannot hold preference shares
Must be held for 5 years

Can transfer shares to spouse or die and keep income tax relief

Question 6

How are dividends often paid by VCTs?

Answer 6

VCTs themselves are exempt from any corporation tax. Therefore profits are often paid as dividends.

Question 8

What CGT relief is available on a VCT?

Answer 8

Exempt from all CGT - there is no minimum holding period

Losses now allowable

Question 10

What risks are there in VCTs?

Answer 10

1) Liquidity (unlisted companies, 5 year holding period)
2) Companies are more vulnerable to economic shocks
3) More sensitive to interest rate rises
4) Failure can be worse (e.g. small start up fails value falls to 0)

Question 11

What are enterprise investment schemes? (EISs)

Answer 11

• Invest in small to medium companies
• Provide attractive tax relief to investors

Question 12

What income tax relief is allowed in EISs

Answer 12

• 30% up to £1,000,000
• a further £1m for investments in knowledge intensive companies
• Can be carried back a year

Question 13

What CGT tax is relief is allowed for EISs?

Answer 13

CGT Free if held for 3 years.

Investments which were made before April 2000. Must be held for 5.

CGT losses are also allowed if an income tax relief has been earnt

Question 14

How does CGT deferral work in an EIS?

Answer 14

CGT gains made elsewhere can be deferred by investing into an EIS - the gain is then realised upon disposal.

Question 15

Inheritance and business relief after how many years for an EIS?

Answer 15

2 years

Question 16

What companies qualify for a seed enterprise investment scheme?

Answer 16

< 3 years old
<= 25 Employees
<= £350k in assets

Question 17

What tax relief is available for SEIS?

Answer 17

Cannot hold more than 30% of shares
- 50% relief up to £200,000
- Must be held for 3 years

Question 18

What did the UK 2017 budget aim to address re: VCT and EIS

Answer 18

That they weren’t just tax shelters.

Capital must be at risk with growth being a primary objective for the funds.

Question 19

What are other types of alternative investment?

Answer 19

1) Jewellery / Watches
2) Cars
3) Antiques
4) Fine Art
5) Wine and Whiskey

Question 20

What is woodlands relief?

Answer 20

If an estate contains woodland which is used to sell timber. The value of the timber can be excluded from any IHT. The IHT is due upon the timber being sold.