Lycetts Financial Services

Alternative Investments

Lycetts advises on the suitability of various alternative tax-efficient investments, such as enterprise investment schemes, seed enterprise investment schemes and venture capital trusts.

These alternative investments were introduced to provide individuals with incentives to invest in small, unquoted companies to boost the UK economy in return for generous tax breaks.

 

Traditionally alternative investment strategies have been viewed as risky, however, over recent years products have been developed which provide an element of capital preservation, thus increasing their popularity and reducing risk.

 

Typically, tax reliefs are:

 

  • Income tax up to 50%
  • Capital gains tax (deferral and exemption on gains)
  • Business property relief qualifying for inheritance tax
  • Tax free income

 

Please see the chart below for further details as at the 2015/16 tax year:

  Venture capital trust Enterprise investment scheme Seed enterprise investment scheme
Income Tax Relief 30% 30% 50%
Tax-free income/dividends YES NO NO
Maximum annual investment £200,000 £1,000,000 £100,000
Minimum holding period 5 years 3 years 3 years
Capital gains tax deferral relief on investment No Yes No
CGT relief on disposal of investment 100% 100% after 3 years 100% after 3 years
Loss relief NO Yes, at taxpayer’s marginal rate on net cost of investment after tax relief. Yes, at taxpayer’s marginal rate on net cost of investment after tax relief.
Inheritance tax relief (IHT)/business property relief NO Yes, after 2 years if qualifying criteria are met Yes, after 2 years if qualifying criteria are met