Royal Assent: how it could affect your investments

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.

View EIS open offers »

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. However, it has now been scheduled for Thursday 15 March 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

Application deadline

How to apply

Wealth Club featured offerTitan Storage EIS – Poole CLOSED CLOSED  
Goldfinch EIS Fund CLOSED CLOSED  
Earthworm EIS CLOSED CLOSED  
Ingenious Greenlight Media EIS CLOSED CLOSED  
Ingenious Infrastructure EIS CLOSED CLOSED  
Ingenious Shelley Media EIS CLOSED CLOSED  
Guinness EIS CLOSED CLOSED  
Hindsight Media EIS CLOSED CLOSED  
Seneca Managed Storage Fund 3 CLOSED CLOSED  
West London Pub EIS CLOSED CLOSED  

Offers marked with our gold “W” are featured offers. Find out more about how we choose.

 

Contract-backed SEIS offers aiming to allot before Royal Assent 

 

Planned allotment date

Application deadline

How to apply

Wealth Club featured offerAmplify Music CLOSED CLOSED  
Wealth Club featured offerGoldfinch SEIS CLOSED CLOSED  

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:

  1. Current rules are more flexible for many investors
  2. 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.