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If you are a 50% taxpayer now is the time to consider ways of reducing your tax liability.  For high net worth individuals there are two types of investment that might be appropriate.  The tax advantages of these products are as follows:-

Enterprise Investment Scheme (EIS)

An investment in an Enterprise Investment Scheme will result in income tax relief of 20% on the investment up to a maximum investment of £500,000 per annum, provided the investment is held for at least three years.  If this minimum holding period is not satisfied then the relief will be withdrawn.

Any capital gain is tax free on the sale of the shares, again the three year ownership is a requirement.

If EIS shares are disposed of at a loss, this loss can be offset against other capital gains or income during that or the previous tax year.

Capital gains tax can also be deferred when another asset is sold and the proceeds are reinvested in an EIS either within three years before or twelve months after the EIS investment.  Here the maximum investment is unlimited, the £500,000 restriction does not apply.

EIS investments are generally exempt from inheritance tax once they have been held for two years.

Venture Capital Trust (VCT)

The Venture Capital Trust investment will result in tax relief of 30% up to a maximum investment of £200,000 per annum, with a minimum holding period of five years.  Any increase in value on disposal will be free from capital gains tax.

As well as the tax advantages there are risks involved in these investments, therefore, you need to take advice from a financial advisor before embarking on them.  At Haxton we have business partners who would be able to take you through the complexities of this type of investment and we would be happy to put you in touch with them.

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