Royal Assent: how it could affect your investments
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
Update – the Finance Bill has received Royal Assent
At 11:05 today (15 March 2018) the Finance Bill has received Royal Assent. This draws a curtain on lower-risk, asset and contract-backed EIS and SEIS. These types of investment have served investors well, but from tomorrow it will all be about growth offers. In other words, if you want the tax relief, you will have to be prepared to take some more risk.
Will this put investors off? In our experience, if the investment case is compelling, and the numbers stack up, investors do take the risk. We’ve recently helped a start-up veterinary hospital raise close to £3m under EIS. No asset-backing, but a good idea, a growth market and a great team, coupled with the potential for a decent return. That’s precisely the kind of company the government wants to help raise funds. So the future is going to be more risky, but quite possibly more interesting and exciting.
In his November Budget, the Chancellor announced a new measure that affects what investments can qualify for EIS and SEIS tax relief.
It will become effective once the Finance Bill receives Royal Assent. It was widely assumed this would happen on 8 March 2018. However, it has now been scheduled for Thursday 15 March 2018 at 11am. Investors looking for asset-backed EIS or SEIS in areas such as pubs, storage and media have been given a week-long extension to invest.
To help you make an informed decision, we have listed below asset or contract-backed offers that aim to allot before Royal Assent, although this cannot be guaranteed. This is not a personal recommendation to invest: capital is at risk and you could get back less than you invest. Tax rules can change and the value of tax benefits depends on circumstances.
Asset or contract-backed EIS offers aiming to allot before Royal Assent
Planned allotment date
How to apply
|Titan Storage EIS – Poole||CLOSED||CLOSED|
|Goldfinch EIS Fund||CLOSED||CLOSED|
|Ingenious Greenlight Media EIS||CLOSED||CLOSED|
|Ingenious Infrastructure EIS||CLOSED||CLOSED|
|Ingenious Shelley Media EIS||CLOSED||CLOSED|
|Hindsight Media EIS||CLOSED||CLOSED|
|Seneca Managed Storage Fund 3||CLOSED||CLOSED|
|West London Pub EIS||CLOSED||CLOSED|
Planned allotment date
How to apply
New measure for EIS and SEIS investment – what is changing?
The new measure aims to encourage investment in independent, entrepreneurial companies seeking to expand, whilst curtailing tax-motivated investments, where the tax relief provides all or most of the return, with limited risk to the investor. In other words, the government wants investors to take enough risk to justify the tax relief.
Whilst the intention is commendable, its implementation could create uncertainty.
After Royal Assent, to attract tax relief each EIS or SEIS company will have to meet a new qualifying condition, the ‘risk-to-capital condition’. In practice, this means being subject to a principles-based test so HMRC can take a ‘reasonable’ view as to whether it is a genuine entrepreneurial company.
As the test is principles-based, at this stage it is unknown how it will work in practice.
EIS or SEIS offering significant risk buffers through asset-backing (e.g. pubs or storage units) or through contracted revenues (e.g. distribution contracts for a film) may conceivably be under greater scrutiny.
Some EIS and SEIS providers have already announced their funds will not be available after Royal Assent. We understand in some cases the fund investment strategy may change and the funds could become more risky.
The full impact of the new measure is uncertain. Two facts remain, though:
- Current rules are more flexible for many investors
- If you invest now and your shares are allotted before Royal Assent, your investment should be subject to current rules.
Experienced investors planning to invest in EIS or SEIS this tax year could be wise to consider acting now.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.