Specialist services:
Investing in small companies can be risky, which is one of the reasons why venture capital schemes were set up in the 1990s. There are substantial tax reliefs to be claimed, but there are also stringent conditions that must be met by both the company or enterprise, and by you as the investor.
The three main schemes that offer tax breaks are:
Individuals investing in innovative companies and social enterprises that are not listed on any recognised stock exchange may be able to claim Income Tax Relief or Capital Gains Tax Relief. The kind of tax relief you can claim is dependent on the scheme you use. You may be able to claim:
There are lengthy and complex eligibility requirements for the schemes, and in almost all cases you need to keep your investment in the qualifying business for at least three years (and five years for a venture capital trust) to claim the available tax reliefs.
The tax advantages of venture capital schemes and venture capital trusts need to be balanced against the increased risks facing small companies and start-ups which are statistically more likely to fail than larger businesses. If you are considering investing in any of these schemes you are strongly recommended to talk to tax and financial planning advisers who can explain more and help you to evaluate if these are the right investment strategies for you.
While the share prices of listed companies are affected by national and international factors, the trajectory of smaller companies is usually very different, and they are often able to react more quickly and flexibly to external influences. Many of our clients are enthusiastic about supporting up-and-coming businesses, recognising that they are helping to create jobs, prosperity and economic growth.
Added to this is the pension ruling that limits the amount an individual can save annually or over their lifetime into a private pension scheme before penalties are incurred. All this may mean that venture capital schemes and venture capital trusts could be a useful part of your retirement planning, especially where the tax reliefs can be deployed.
As with any investment decision, it is important to be aware of, and comfortable with, any associated risks that may come with the strategy you have adopted. Tax regulations may be amended, your circumstances may change, and of course businesses may fail.
Do you have a specific tax issue you’d like to discuss? Or are you simply looking for a long-term plan that protects the financial future of the children and young people you want to provide for? We’re here to provide you with answers.
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