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Your client’s key objectives were:

  • Investment objective: Diversification
  • Tax objective: Capital gains tax planning

The results:

Based on the objectives you selected, we’ve suggested tax-efficient investments you might want to consider.  

We’ve broken these suggestions down by those that meet:

  • Both the investment and tax objective
  • The investment objective only
  • The tax objective only
Investment and tax objectiveInvestment objectiveTax objective
Enterprise Investment Scheme Venture Capital Trusts or Enterprise Investment Scheme Enterprise Investment Scheme

Tax-efficient investments

What is the Enterprise Investment Scheme?

Investors in an EIS portfolio own shares directly in a portfolio of early-stage companies. EIS typically appeals to experienced investors who want to back companies with high growth potential. Investors can claim generous tax reliefs because of the risks involved, which include loss relief when an underlying investment returns less than they invested.

What are the reasons to invest?

High growth potential

Access to high-risk opportunities with the potential for high growth.

Tax reliefs

Reliefs include upfront income tax relief, tax-free growth, loss relief, capital gains tax deferral, and inheritance tax relief.

Diversification

Access early-stage companies investors wouldn’t hold in a mainstream investment.

Points to consider

An EIS portfolio invests in small early-stage companies. The combination of tax reliefs available makes an EIS-qualifying portfolio a compelling structure through which to target high growth. 

Investors must hold shares for a minimum of three years to keep any tax reliefs claimed and should be prepared to hold their shares for significantly longer to allow time for growth and liquidity. 

If your client is looking for relief from inheritance tax, please consider the longer time horizons and additional risks that come with EIS investments. In some cases, EIS investments will not be the most suitable option for a client planning for inheritance tax, especially if they wish to target predictable returns.  

Risks to bear in mind

Capital at risk

The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.

Volatility and liquidity

VCT, smaller and unquoted company shares could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.

Qualification status

Tax reliefs depend on VCTs maintaining their qualifying status or portfolio companies maintaining their BR- or EIS-qualifying status.

Tax treatment

Tax treatment depends on individual circumstances and could change in the future.

Enterprise Investment Schemes from Octopus

VCTs from Octopus

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