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:
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%|
|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|