Film and healthcare funds launch
Two new enterprise investment schemes (EIS) have been launched this week, both offering tax-efficient access into some niche investment areas.
Specialist venture investor Longbow Capital has unveiled the Longbow Approved EIS Fund, which invests in emerging healthcare, life science and wellbeing companies.
It will invest in a portfolio of six to eight companies within a 12-month period. The fund closes to new investment on 1 April and aims to raise £10 million.
Longbow is a founding partner of the Boots Centre for Innovation, which works closely with early stage companies or inventors to develop pioneering products for the shelves of Alliance Boots stores.
Julian Hickman, partner at Longbow Capital LLP says: "The fund provides investors with access to investment prospects that emerge from the BCI as well as other sources, which will excite investors looking into the wellbeing, healthcare and life science field.
"The relationship with Boots ensures that these products have access to a distribution network, meaning that investors will see the products rolled out across the UK and through international networks."
There is a minimum investment of £10,000, an upfront charge of 5% and management fee of 2%.
Meanwhile fund manager Lacomp has been working with media adviser Sparta to design a film EIS fund.
The Sparta Film & TV Risk Managed EIS Fund offers a solution for UK individuals seeking to defer a capital gain and/or reduce their income tax and inheritance tax liabilities while seeking tax-free capital gains following the three-year EIS qualifying period.
By investing in the fund, higher rate UK taxpayers that have recently crystallised a 40% capital gains tax (CGT) gain can make a further 22% tax saving, by enabling the CGT liability to be charged at the new flat rate of 18%.
Commenting on the launch, Lacomp MD Peter Buxtorf says: "There have been EIS fund structures in the past that have either concentrated primarily on capital growth or risk mitigation. Having listened to investors, we wanted to offer them a product that gave them both.
"Our investment strategy for the fund will result in the very significant reduction of the risk of capital loss, without in any way compromising or limiting the potential profitability of any of the productions backed by the fund."
The EIS is a government scheme that provides a range of tax reliefs. It can offer mitigation across several different brackets including income tax, inheritance tax and capital gains tax - for example investors may receive 100% inheritance tax relief if the EIS is held for two years.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.