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EARLY STAGE INVESTING

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Disclaimer

This Presentation is an exempt financial promotion for the purposes of section 21 Financial Services and Markets Act 2000, by reason of article 16(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, which has been issued by Kuber Ventures Limited, an appointed representative of Sturgeon Ventures LLP, which is authorised and regulated by the Financial Conduct Authority. The presentation has been approved by Sturgeon Ventures LLP

The attention of prospective investors is drawn to the fact that amounts invested in Enterprise Investment Scheme (EIS) Funds will be committed to investments which are of a long term and illiquid nature and are therefore not suitable for all investors. Neither the EIS Funds nor the companies in which they invest will be quoted on any regulated exchange or market and, accordingly, there will not be an

established or ready market in participations in the EIS Funds or the underlying investments. An investment in the EIS Funds will therefore not be easily realisable before maturity.

This Presentation does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation. It is the responsibility of each recipient (including those located outside the UK) to satisfy itself as to full compliance with the applicable laws and regulations of any relevant territory in connection with any application to participate in the EIS Funds including obtaining any requisite governmental or other consent and observing any other formality presented in such territory.

You should be aware that investment values and any income from them may go down as well as up and you may not get back the amount you originally invested. No person has been authorised to give any information or make any representation concerning the EIS Funds other than the information contained in this Presentation or in connection with any material or information referred to in it and, if given or made, such information or representation must not be relied upon. In accordance with COBS 2.4 of the FCA Handbook the information has been verified to the best our ability. All statements of opinion or belief contained in this Presentation and all views expressed and

statements made regarding future events represent Kuber Ventures Limited’s own assessment and interpretation of information available to them as at the date of this Presentation.

Kuber Ventures Limited is not a tax adviser and you should independently verify the financial planning strategies outlined in this presentation

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Agenda

Introduction and review of EIS/ SEIS planning

Seed Mentors

CHF Media

Boundary Capital

Closing Remarks

(4)

Learning Objectives

Understand early

stage investing

and the regulatory

context

To refresh

knowledge of tax

planning

opportunities of

SEIS and EIS

To explore

investment risks

how these can be

mitigated

To understand the

range of SEIS

funds on the

Kuber platform

(5)

Key risks

Liquidity risk

• EIS/ SEIS No

Secondary

market

• Exit

dependant

on corporate

event

Tax risk

• Personal

circumstances

• Change in law

• Early exit

• Loss of status

• Advanced

Assurance

Investment

performance

• Specific risks

• Valuation

• Dilution

• Operational

risks

• Systemic risks

(6)

Regulatory context

SEIS and

EIS funds

• EIS and SEIS Funds are generally

AIFs

or

MIFID Portfolios

• Fund Managers are

FCA Authorised

and

funds are covered by

FSCS

• Specific

CIS exemption

for EIS/ SEIS

portfolios

• Virtually all

EIS and SEIS funds are

not

UCIS

• It is easy to

inadvertently

structure an

EIS or SEIS fund as a

UCIS

so funds

must have

reputable advisers

in place

• Some “funds” are simply baskets of

investments with

no FCA authorised fund

manager.

i.e. Not

FCA regulated

and no

(7)

Summary – Regulatory context

Board of directors, listing

regulations,

FCA

and

FSCS

FCA

authorised managers

FSCS

Companies Act +Listing

regulations, Audit

Companies Act

VCT

SEIS and EIS

funds

Listed direct

company investment

Unlisted single company

(8)

Upfront tax relief

Carry back

EIS and SEIS – one year

Taxation of dividends

EIS and SEIS: Taxable

Qualifying holding period

EIS and SEIS 3 years

CGT relief

SEIS 50% relief

EIS: CGT Deferral relief

Upfront income tax relief

(9)

Loss relief

SEIS and EIS

Loss relief applies to individual holdings

• as opposed to net of profits across portfolio (collective)

Applies to loss net of income tax relief

• 45%taxpayer tax reclaim

61.5%

for EIS and

72.5%

for SEIS

• CGT Deferral (EIS)

-• SEIS 45% tax payer + CGT relief

86.5%

Choice of how to use losses

• Income tax

• Capital Gains Tax

(10)

Power of Loss Relief Portfolio example

10 investments - £100

each

Total investment £1,000

Initial

investment

Net profit

(loss)

Total return

post tax

1 investment

fails

£100.00

£(38.50)

£61.50

2

lose 30%

£200.00

£0.00

£200.00

4

break even

£400.00

£120.00

£520.00

2

return 1.3 X

investment

£200.00

£120.00

£320.00

1

returns 5 X

money

£100.00

£430.00

£530.00

Total return

£1000.00

£631.50

£1,631.50

Investment

£100.00

Tax relief

(£30.00)

Loss amount

£70.00

Tax relief (@45%)

(£31.50)

Net loss

(£38.5)

(11)

Inheritance Tax Planning

Qualifying

Business Property

Cash

holdings are

not

Replacement

Property

Key –

diversified

portfolio

• 2 year holding period

then Exempt from IHT

• Death within 2 years

• Contract for sale

• Must

reinvest the

entire

proceeds

• 3 Year limit

• Cashing up

• Replacement

(12)
(13)
(14)

Client profile

Id

ea

l cl

ien

t

40 or 45% income

tax

Change in rate

unlikely

Capital Gains Tax

liability

(15)

Important considerations

Diversify

3 fly in

30

concept

Specific

vs

systemic

risks

Selection investment

Select by

manager

Planning

Complete

financial

planning

Justify

increase in

risks

(16)

Comparison of Investment

structures

VCT

• Income tax relief

• No CGT or IHT

• Tax free dividends

• Secondary market

EIS

• CGT planning

• Income tax relief

• IHT planning

SEIS

• Generally higher risk investments

• 50%

income tax relief

• 50%

CGT write off

• Loss Relief important.

• Future tax rates

-

loss relief

(17)

Suitability: EIS/ SEIS

HNWs

40/45%

tax

IHT:

2 years

CGT

Annual

or LTA

issues

School

fees

Generally

don’t pay

dividends

• Dividends

taxable

(18)

Diversification

Tax

structure

Sector

Funding

stage

Underlying

company

Provider/

Manager

Vintage

(19)

May - Sept

M on th s

Jan - March

When to invest – tax timetable

July

payment on

account

reduce

January

tax

payment

Mop up

previous year’s

tax capacity

seeking

to carry

back

CGT and IHT not date sensitive

Busy period for tax certificates

Commit funds now to secure most

choice of investment

(20)

KUBER VENTURES LIMITED

Multi-Manager Tax Efficient investment Platform

Why a platform for EIS?

(21)

Platform for EIS, SEIS and IHT

portfolios

Diversification

Due diligence

Manager of

managers

Operational

efficiency

Adviser

charging

Administration

management

(22)

Kuber Ventures: platform solution

Custodian account

Fund

1

Nominee holds EIS shares on

your behalf

Fund

2

Fund

3

Fund

4

Fund

5

Cash

(23)

Kuber news

Early bird offer for cleared funds received

before 31 October 2015

• Initial fees reduces to 1.4%

• Depending on portfolio

• Asset focused 25% reduction in net initial charge

• Seed and early stage portfolios – negative initial charge

(24)

What next?

Consider opportunities within your client bank

45% tax

CGT

IHT

LTA

issues

Solicitors

and accts

Decide on strategy and carry out

due diligence

Meet

Kuber

Panel

020 7952

6685

Approach potential clients

and introducers

Marketing

strategy

Professional

connections

CPD workshops

www.kuberventures.com

(25)

Further information

Helpline

• 020 7952 6685

Online resources

• www.kuberventures.com

http://www.theaic.co.uk/guide-to-investment-companies/venture-capital-trusts-vcts

• http://www.hmrc.gov.uk/manuals/vcmmanual/Index.htm

References

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