Discussion
Does anyone here invest in VCT's at all?
As a former company director turned PAYE employee I'm keen on investments that will reduce my tax burden, and I'm pretty comfortable with a 5 year term compared to locking the funds away in a pension (20 years away for me, and I plan to be retired sooner!). I have a "safe" income vehicle already in place, with a small-ish traditional pension and some B2L property. I don't really want to increase my taxable income by getting another property or two.
Hence looking at VCT's, and some willingness to accept more risk.
Any personal successes or horror stories, tips or pitfalls would be welcomed.
As a former company director turned PAYE employee I'm keen on investments that will reduce my tax burden, and I'm pretty comfortable with a 5 year term compared to locking the funds away in a pension (20 years away for me, and I plan to be retired sooner!). I have a "safe" income vehicle already in place, with a small-ish traditional pension and some B2L property. I don't really want to increase my taxable income by getting another property or two.
Hence looking at VCT's, and some willingness to accept more risk.
Any personal successes or horror stories, tips or pitfalls would be welcomed.
I am an Angel Investor and mainly use one site to invest through (see my profile). It's fantastic and the main one that private investors use.
I don't like using funds particularly as I see part of the fun researching and picking the companies myself.
The EIS and SEIS tax breaks are fantastic and ensure you hand over as little as possible to HMRC.
Good luck!
I don't like using funds particularly as I see part of the fun researching and picking the companies myself.
The EIS and SEIS tax breaks are fantastic and ensure you hand over as little as possible to HMRC.
Good luck!
Hammers fan ?!
In terms of having to conform to compliancy, I probably look at, and choose from about 5-7 providers these days. Many providers who I periodically send e-mails to, when requesting clarification or simply doing ongoing due diligence don't even bother to reply and so they get sifted out in Round 1.
The terms of some of the contracts can be opaque (and pricy) so take your time, time spent in reconnaissance is seldom wasted. Remember as well, that you don't have an inexhaustible amount of tax relief that you can claim - if someone (and let's keep this simple) pays 40k tax and options 35k of that into annual pension contributions, you only have a very small amount remaining to place into a VCT.
The scope of investments is immense ("Invest in a chain of crematoria sir? Suits you sir!") but identify a field that you're happy with and research the hell out of it. The tax dog should never wag the investment tail and remember above all, that the underlying investment risk you associate with these wrappers is going to be (nearly always) higher than more conventional investments you've also got.
So, be objective about stories of amazing tax breaks and huge gains and remember that with anecdotal tales of getting 'free money' from HMRC comes a certain amount of uncertainty and worry along the way - do you need it, and have you done some worse case scenario modeling?
The d2c market is growing fast for this kind of investment - there seems to be a dragon in all of us these days. If you had 10k to invest in a small fledgling company, would you get sufficient info to make an informed decision? I doubt it. Being boring for a moment, taking an informed decision on high risk investments that you know well is one thing, but being sold something online is the kind of irresponsible idiocy that created the conditions of the credit crunch.
Hard, fast sells about amazing returns and high impact success stories abound, so keep your pipes cool. Scratch the surface and usually you'll find it's not you who's getting rich. Anyway, I'll step down from my pulpit now.
Getting the grass roots investments right is one thing, but scoping the big picture, building up an emergency fund, identifying asset allocation, tax wrappers, partner situation etc.. it's that which forms the foundations of growing wealth. Choosing correctly priced funds within a pension might be intensely uncool but it's the basics that sets you off on the right path and which, ultimately, might make you more money than the allure and the promised return of an esoteric VCT.
Looked too, at SEIS/EIS and SITR? They probably wouldn't be suitable but if they are, make informed decisions based on advice you trust, whether that's from a bloke in the bank, an IFA or a good mate. But with these sorts of investments, as you're doing, do your research and think long and hard first.
http://www.hmrc.gov.uk/sitr/
In terms of having to conform to compliancy, I probably look at, and choose from about 5-7 providers these days. Many providers who I periodically send e-mails to, when requesting clarification or simply doing ongoing due diligence don't even bother to reply and so they get sifted out in Round 1.
The terms of some of the contracts can be opaque (and pricy) so take your time, time spent in reconnaissance is seldom wasted. Remember as well, that you don't have an inexhaustible amount of tax relief that you can claim - if someone (and let's keep this simple) pays 40k tax and options 35k of that into annual pension contributions, you only have a very small amount remaining to place into a VCT.
The scope of investments is immense ("Invest in a chain of crematoria sir? Suits you sir!") but identify a field that you're happy with and research the hell out of it. The tax dog should never wag the investment tail and remember above all, that the underlying investment risk you associate with these wrappers is going to be (nearly always) higher than more conventional investments you've also got.
So, be objective about stories of amazing tax breaks and huge gains and remember that with anecdotal tales of getting 'free money' from HMRC comes a certain amount of uncertainty and worry along the way - do you need it, and have you done some worse case scenario modeling?
The d2c market is growing fast for this kind of investment - there seems to be a dragon in all of us these days. If you had 10k to invest in a small fledgling company, would you get sufficient info to make an informed decision? I doubt it. Being boring for a moment, taking an informed decision on high risk investments that you know well is one thing, but being sold something online is the kind of irresponsible idiocy that created the conditions of the credit crunch.
Hard, fast sells about amazing returns and high impact success stories abound, so keep your pipes cool. Scratch the surface and usually you'll find it's not you who's getting rich. Anyway, I'll step down from my pulpit now.
Getting the grass roots investments right is one thing, but scoping the big picture, building up an emergency fund, identifying asset allocation, tax wrappers, partner situation etc.. it's that which forms the foundations of growing wealth. Choosing correctly priced funds within a pension might be intensely uncool but it's the basics that sets you off on the right path and which, ultimately, might make you more money than the allure and the promised return of an esoteric VCT.
Looked too, at SEIS/EIS and SITR? They probably wouldn't be suitable but if they are, make informed decisions based on advice you trust, whether that's from a bloke in the bank, an IFA or a good mate. But with these sorts of investments, as you're doing, do your research and think long and hard first.
http://www.hmrc.gov.uk/sitr/
Have invested for number of years - principally through Octopus.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Have invested for number of years - principally through Octopus.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Have invested for number of years - principally through Octopus.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Less fun than previously as only 30% relief although still only 5 year investment needed.
Wouldnt just invest in them but as part of overall investments can be a nice addition - once tax relief and then dividends are considered I have made the equivalent of about 7% per year each year - tax free but may have been lucky / unlucky and accept that through Octopus I cannot pick and choose the very very largely AIM conmpanies they pick.
Ginge R said:
Hammers fan ?!/
Close - S
horpe United!Ginge R said:
Looked too, at SEIS/EIS and SITR? They probably wouldn't be suitable but if they are, make informed decisions based on advice you trust, whether that's from a bloke in the bank, an IFA or a good mate. But with these sorts of investments, as you're doing, do your research and think long and hard first. http://www.hmrc.gov.uk/sitr/
Thank you for the detailed reply. VCT's make some sense alongside my other investments and the tax relief is a significant added bonus. I've also since looked more closely at SEIS & EIS, as I also have an impending CGT bill, and as I have yet to invest much of the proceeds then these may provide another option. What I can't find though is a "calculator" I can make sense of...
e.g Say I have a £500k gain, which is eligible for Entrepreneurs relief, so the CGT bill is £50k ignoring any personal allowances. How does the CGT reinvestment relief work? If I found a suitable investment that I wanted to invest £100k in, what relief would I get on that? Presumably not 28% due to the Entrepreneurs relief I already plan to claim. So 10%? Or can I not mix the two?
Updated to perhaps answered my own question, but can't make absolute sense of the HMRC guidance, so not sure how SEIS CGT relief and Entrepreneurs Relief interact, but I suspect it isn't how I would like them to!...
£500k chargeable gain arising 2014/2015
£50k+ income tax over 2013/2014 and 2014/2015
£100k invested in one or more SEIS
£50k income tax relief
£28k CGT relief
£22k net investment cost
That leaves £400k of chargeable gain not offset against the SEIS, on which I would claim ER, thus paying £40k (ignoring annual allowance)
- Or* is ER applied first, in which case the CGT relief I could claim on the SEIS investment would be 10%, resulting in:
£50k+ income tax over 2013/2014 and 2014/2015
£100k invested in one or more SEIS
£50k income tax relief
£10k CGT relief
£40k net investment cost
The first calculation makes some of the SEIS opportunities look attractive, the latter not so much - which would be back to plan A of paying the CGT bill and focussing on adding some VCT's to my portfolio.
Edited by UpTheIron on Friday 19th September 13:13
Edited by UpTheIron on Friday 19th September 13:14
Scunny??!! Used to go there every now and then 20 years or so ago.
I am tapping this from the poolside, trying to avoid the beady stare of the light of my life, she who must be obeyed. It seems like you've got a complex issue on the go there. If you approached someone for a personal steer, you'd do a heck of a lot worse. If you'd like to drop me a line, I'd be delighted to help with some basic generic info. If you do, you might not get an answer for a few days mind, my access to e-mail is restricted because I have to lie still and 'relax'. Apparently!
Failing that, I'm sure there are lots of other informed minds here as well who can chip in - but I would speak one to one with someone suitably qualified and genned up mind. You don't want to be getting this one wrong.
Right, time for a spot of John Grisham.
I am tapping this from the poolside, trying to avoid the beady stare of the light of my life, she who must be obeyed. It seems like you've got a complex issue on the go there. If you approached someone for a personal steer, you'd do a heck of a lot worse. If you'd like to drop me a line, I'd be delighted to help with some basic generic info. If you do, you might not get an answer for a few days mind, my access to e-mail is restricted because I have to lie still and 'relax'. Apparently!
Failing that, I'm sure there are lots of other informed minds here as well who can chip in - but I would speak one to one with someone suitably qualified and genned up mind. You don't want to be getting this one wrong.
Right, time for a spot of John Grisham.
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