st. james’s place wealth management

Ingenious Investments www.ingeniousmedia.co.uk

St. James’s Place Wealth ManagementEIS and VCT “Back to Basics” Workshop

For Professional Advisers only, not to be distributed to Retail Clients


Agenda

1. Introduction to Ingenious

2. Background to the Venture Capital Initiatives

3. The tax reliefs associated with EIS

4. How, where and why these reliefs have been enhanced by the Government

5. The tax reliefs associated with VCT

6. Administration and EIS timetable

7. Why invest in an EIS or VCT: Income Tax relief Capital Gains Tax deferral and Capital Losses Inheritance Tax Planning Rolling EIS Investment programme UK resident, Non Domiciled Individuals


• Founded in 1998

• Ingenious is a market leading independent financial services group providing investment and advisory expertise

• Clients include institutions, corporates, family offices, high net worth individuals and retail investors

• Our activities focus on the media and entertainment, sport and leisure, and clean energy sectors, operating a number of specialist funds with in excess of £7 billion raised and invested

• UK’s largest independent investor in the creative economy

• The Group has delivered sustainable and substantial profits each and every year since formation regularly featuring in The Sunday Times Top Track list of growth companies

• Strong balance sheet and no debt

• One of the UK’s leading alternative asset managers and a specialist in EIS offerings

• Over £450m raised from EIS investors since 2005 invested into more than 241 EIS companies

• 89 EIS companies successfully exited with actual returns in line with those targeted

Introduction to Ingenious


Group Structure


Background to the Venture Capital Initiatives

• EIS, VCTs and SEIS are Government sponsored initiatives designed to encourage investment in small, unquoted trading companies

• The aim of the schemes is to help close the “equity gap”, whereby small businesses often find it difficult to raise large amounts of capital

• The schemes offer investors a wide range of tax reliefs to help provide downside protection against what are often higher risk investments

• The Enterprise Investment Scheme (EIS) was introduced in 1993

• The Venture Capital Trust (VCT) was introduced in 1995

• The Seed Enterprise Investment Scheme (SEIS) was introduced in 2012


Income Tax Relief• Reduction in income tax liability amounting to 30% of the total investment up to a maximum of £1,000,000

• Income tax relief on investments of up to £1,000,000 can also be carried back to the previous tax year (2012/13)

• Relief cannot exceed an amount which reduces the investor’s income tax liability to nil

CGT Disposal Relief• Any gain on the disposal of EIS shares after three years and on for which EIS income tax relief has been given

and not withdrawn, will be exempt from CGT

CGT Deferral Relief• To the extent to which a UK resident investor generates a chargeable gain, he/she can claim to defer paying CGT

on all or part of that chargeable gain by investing in qualifying EIS shares

• No limit on the amount of chargeable gains which may be deferred in this way

• Applies to any chargeable gains arising three calendar years prior to the qualifying EIS investment or one year after the issue of qualifying EIS shares

• Gains are deferred until there is a chargeable event such as a disposal of the EIS shares or an earlier breach of the EIS rules

The tax reliefs associated with EIS?


Inheritance Tax Relief• EIS shares should constitute “relevant business property” for inheritance tax purposes

• Once shares have been held for a period of two years, they should qualify for 100% business property relief (BPR) and will fall outside the investor’s estate

Loss Relief• Tax relief is available for any loss realised on the disposal of qualifying shares on which EIS income tax relief has

been obtained

• The loss (net of any income tax relief initially obtained) may be set against the individuals taxable income arising in the tax year in which the disposal occurs, or the previous tax year

• Alternatively, the loss may be offset against capital gains in the tax year of disposal

• Any excess losses may be carried forward for relief against future capital gains

The tax reliefs associated with EIS


The Enterprise Investment Scheme – Summary of Rules

• The Enterprise Investment Scheme (EIS) is a Government incentive to help smaller entrepreneurial trading companies raise

The company must have fewer than 250 employees

The maximum annual amount that can be invested in a single company is £5m

The annual amount that an individual can invest is £1m

The Gross assets of the company must not exceed £15m immediately before any share issue and £16m immediately after that issue


The tax reliefs associated with VCT

Income Tax Relief• Reduction in income tax liability amounting to 30% of the total investment up to a maximum of £200,000 in any tax

year

• Applies to new ordinary shares only

• No carry-back facility

• Relief cannot exceed an amount which reduces the investors income tax liability to nil

Dividend Relief• VCT dividends are exempt from income tax

• Applies to both new and second-hand shares

• VCT distributions can be paid from capital

CGT Disposal Relief• Any gain on the disposal of VCT shares after five years and on which VCT income tax relief has been given and

not withdrawn, will be exempt from CGT


Administration

EIS – note EIS 3 • Companies that are hoping to raise funds under EIS are encouraged to seek advance assurance from HMRC,

prior to inviting applications for shares

• Although the procedure is not statutory, HMRC is usually bound by an assurance given, provided that the information supplied was correct and complete at the time it was given and the circumstances remain the same as those described in the advance assurance applications.

• Once the company has been trading for four months, an EIS1 form is submitted to HMRC, providing details of the investors and the shares issued

• HMRC will then authorise the company on a form EIS2, to issue certificates (on form EIS3) to the investors

• HMRC will send the company a number of blank forms EIS3 “EIS Certificates” – which the company then completes and provides to the investors

• Investors can then claim tax relief via their tax return or a stand alone claim

VCT• Companies must apply to HMRC for VCT approval

• In practice, VCTs issue income tax relief certificates as a matter of routine along with share certificates

• Investors can claim tax relief via their tax return or a stand alone claim

• Investors who receive exempt dividends are not required to show them on their tax returns


Example EIS Timetable

Note: This timetable is indicative only; the timing of receipt of EIS 3 certificates will vary for each EIS company depending on time required to allot shares and the production timetable for the company’s first programme.

10 11 12

Submit application and Investment

Mon

ths

Shares allotted

Commencement of EIS trade (start of production on

1st TV show)

0 1 2 3 4 5 6 7 8 9

Ingenious applies to HMRC for your EIS3 certificate (4 months after commencement

of trade)

Receive EIS3 certificate

Either claim 30% income tax relief on tax return or through adjustment to

PAYE coding

Every year you will receive:1. Annual

Report & Financial Statements

2. Production update

3. Notice of AGM


Why invest in an EIS or VCT?

They are a viable alternative investment in a climate of low interest rates, equity volatility, concerns about inflation, and a reduction in tax relief for pensions, many advisers are now considering the relative advantages of EIS or VCT investments for their clients.

1. Income Tax relief

2. Capital Gains Tax deferral

3. Inheritance Tax Planning

4. Rolling EIS Investment programme

5. UK resident, Non Domiciled Individuals


• Invest £100,000

• Claim income tax credit of £30,000 (i.e. 30% of £100,000)

• Tax bill reduced from £67,098 to £37,098

Case study - 45 year old executive, £180,000 income, with an element of liquidity and looking for medium term returns with a desire to broaden his range of alternative investments

£32,010 taxed at 20%

£117,990 taxed at 40%

£30,000 taxed at 45% £13,500

£47,196

£6,402

Taxable Income = £180,000 Tax Payable = £67,098Note: Personal Allowance irrelevant at this level of income

1. Income Tax Relief


2. Capital Gains Tax Deferral

Case study - 78 year old client has made a capital gain of £100,000 in the 2011/12 tax year. He has already paid his CGT bill of £28,000 in January 2013.

So why Invest in an EIS?• It is a viable alternative investment in a climate of low interest rates and equity volatility• By making an EIS investment in the 2013/14 tax year of £100,000 the client can elect to defer the 2011/12 gain• The £28,000 CGT that he has already paid is refunded by HMRC.• The gain is deferred until the EIS shares are subsequently disposed of BUT in the event of death whilst holding

the EIS shares, the gain will never come into charge.

Result:• The client has enjoyed a £30,000 income tax credit in 2013/14• He has deferred a capital gain of £100,000 and received £28,000 back from HMRC


£250,000 £350,000 £100,000

Purchased property in

2000

Sold property in

2011/12

Capital Gain

£28,000

Paid Capital Gains Tax

(CGT)

£100,000

Invest in EIS 2012/13

£28,000

CGT Credit

Deferred for the life of

EIS

2. Capital Gains Tax Deferral


3. Inheritance Tax Planning

Business Property ReliefEIS investments qualify for Business Property Relief (BPR) after two years and will therefore be considered outside of the estate for Inheritance Tax (IHT) purposes.

Replacement Business Property Clients selling an asset which already qualifies for BPR, may be able to benefit from BPR immediately on making an EIS investment

However: While EIS investments are a viable alternative investment when considering estate planning for a particular client, it is worth noting that the shares allotted are illiquid and will be tied up in the EIS until such time that the EIS companies look to return the capital to its shareholders.

If this is a concern to a client, then there are stand alone BPR qualifying investments, which don’t share the same advantages as an EIS with regards to tax reliefs, but they do allow an estate to liquidate assets in a more timely fashion than an EIS


4. Rolling EIS Investments

£100,000 £100,000 £100,000

Year 1 Year 2 Year 3

£100,000

Year 4

£100,000

Year 5

£100,000

Year 6

Use the 30% tax credit for cashflow purposes e.g. school fees

Year 5 you can use the capital returned from Year 1 investment to make a further EIS investment and gain another 30% tax credit.

£30,000 £30,000 £30,000 £30,000 £30,000 £30,000

EIS Investment

30% Tax Credit


5. UK Resident, Non Domiciled Individuals

Often, monies held offshore by non-domiciled individuals will be generating very little return. The individual cannot bring the money onshore to spend in the UK, as this would give rise to an immediate 45% tax charge (assuming they are an additional rate tax payer).

Legislation introduced in the Finance Act 2012 states that post 6 April 2012, if a non-domiciled, UK resident individual who are taxed on the remittance basis, remits offshore monies to the UK and makes (within 45 days) a “qualifying investment” (which includes an investment in an EIS qualifying company), not only will such income not be treated as remitted to the UK, but it could also generate a 30% income tax credit to offset against the individual’s UK tax liabilities.

In the event that the individual disposes of their investment following the minimum 3 year period, the individual may either:• Reinvest the monies within 45 days • Send the money back offshore within 45 days (any profit can remain onshore without triggering a taxable

remittance)• Keep the money onshore, paying the prevailing rate of tax on the sums originally remitted


Important Information

• This presentation relates to the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). This presentation is issued by Ingenious Media Investments Limited (Ingenious Investments), which is authorised and regulated in the UK by the Financial Conduct Authority (the FCA) under the Financial Services and Markets Act 2000 (FSMA).

• The information in this presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe to any EIS, SEIS or VCT. Any decision in connection with an investment in any EIS, SEIS or VCT should be made only on the basis of information contained in the relevant Information Memorandum or Prospectus. If an investor is in any doubt about the content of the relevant Information Memorandum, Prospectus and/or presentation and/or any action he or she should take, they are strongly recommended to seek advice immediately from a financial adviser authorised under FSMA who specialises in advising on the opportunities referred to in this presentation. In the event of a conflict between this presentation and the relevant Information Memorandum or Prospectus, the relevant Information Memorandum or Prospectus will prevail. An investor’s attention is drawn to the risk factors set out in the relevant Information Memorandum or Prospectus. Nothing in this presentation, the relevant Information Memorandum or the Prospectus constitutes investment, tax, legal or other advice by Ingenious Investments or Ingenious Ventures (a trading division of Ingenious Capital Management Limited). An investor should seek advice about their own financial position in relation to entitlement to tax reliefs.

• No representation is made or warranty given as to the accuracy, completeness or achievability of any projections, views, statements or forecasts, which are illustrative. The projections, views, statements and forecasts herein are based upon various assumptions and estimates which involve significant elements of subjective judgement and analysis and which are subject to uncertainties and contingencies; actual results could differ materially from those set forth in such projections, views, statements and forecasts. Investments made in any EIS or SEIS or by any VCTs are likely to be illiquid.

st. james’s place wealth management

Documents

eis income tax relief

eis investors

eis companies89 eis

eis timetablewhy

eis offerings

governmentthe tax reliefs

investors income tax

previous tax year