We are investors like you and will invest alongside you in each of the investee companies so that our interests will be aligned with yours.
We therefore choose a simple fee structure, which is divided into a subscription fee, a corporate finance fee and a standard performance fee.
Our subscription fee is 4% of the amount you invest in our Fund. This is paid by you as the investor and charged before any investments are made in the investee companies.
Corporate finance fee
We charge investee companies in which the Fund invests a corporate finance fee of up to 10% of the total sum invested in the relevant investee company. This will be paid on the completion of the Fund’s investment in that particular company. We do not charge investee companies ongoing fees. Our ability to charge fees to investee companies depends on a negotiation with the entrepreneurs and it might be that we do from time-to-time invest at a higher share price to ensure that the investee companies are able to pay our fees.
Standard performance fee
We will charge a standard performance fee of 20% of the total return in excess of each Investor’s original subscription. This fee will only be payable once you have received back the full amount of your original subscription. For example, if your original subscription is £25,000, the performance fee will not be applied until £25,000 has been returned to you. From this fee, we will pay any performance fees due to our world class team of mentors who will be involved in advising and supporting our investee companies.
Please note that VAT will be charged on all our fees where applicable.
If you have any questions about the fees and charges, please call us on +44 (0) 203 826 0338 or email us at email@example.com.
The Fund will invest in companies, which qualify under the Enterprise Investment Scheme having made, where possible, an initial investment which qualifies pursuant to the Seed Enterprise Investment Scheme.
Income Tax Relief
Under the EIS, 30% of the amount invested in EIS qualifying companies can be deducted from an Investor’s income tax bill in the tax year of investment or, if requested, in the preceding tax year, subject to reducing that bill to zero and to an annual investment limit of £1 million. This is subject to any income tax relief which has already been claimed under the EIS for that year. Under the SEIS, the rate of income tax relief given is 50% and this is subject to an annual investment limit of £100,000.
Capital Gains Tax Relief
When SEIS or EIS investments are sold, the seller enjoys tax-free capital gains on any increase in their value.
Capital Gains Tax wipe-out on gains (SEIS investments only)
Where an Investor has made a gain on the disposal of assets during the tax year prior to investment, 50% of the tax payable on this gain can be wiped out entirely to the extent the gain is invested in SEIS qualifying shares and an eligible claim for SEIS Relief is made in respect of the tax year in which an investment is made.
Capital Gains Deferral Relief (EIS investments only)
Investors who have made a capital gain which is taxable or which was taxed within the last three years can invest the gain in an EIS qualifying company through the Fund and the capital gains tax can be deferred over the life of the investment or recovered (if already paid). Investors have three years from the date of realising a gain to invest (and the Investor can even reclaim capital gains tax paid in the preceding two years) or can go forward one year from the date on which the Fund invests in an EIS qualifying company. If the Investor dies whilst the money is invested in the Fund, the tax due on the Investor’s deferred capital gain will die with the Investor. The initial deferral therefore leads (on death) to capital gains elimination. Whilst income tax relief at 30% is limited to the first £1 million invested in any tax year, there is no upper limit on the size of the capital gain that can be deferred after two tax years.
Inheritance Tax Relief
SEIS and EIS qualifying investments also qualify for 100% business property relief from IHT; provided they have been held for at least two years, are still held at time of death and remain unlisted. This means that the value of the shares will fall outside the Investor’s taxable estate and will not be subject to inheritance tax.
If the Investor makes a loss on an investment in any SEIS or EIS qualifying company, the net amount of that loss (after deducting any income tax relief obtained on making the investment) can be offset against the income tax charged in the year in which the loss is made, or can be carried back to the previous tax year. Alternatively, the amount of the loss (after taking into account any income tax relief initially obtained) can be offset against the individual’s capital gains in the tax year in which the disposal occurs, or, if not fully used, against gains of a subsequent year. Tax relief is available at any time in respect of any loss realised upon a disposal of shares in a SEIS or EIS Qualifying Company on which EIS income tax relief or CGT deferral relief has been given and not withdrawn.
Resident Non-Domiciled Investors
In order to promote inward investment into the UK, under the Finance Act 2012 and with effect from 6 April 2012, the government introduced a new incentive, Business Investment Relief (“BIR”), which enables UK resident Non-Dom Investors to remit overseas income or capital gains tax-free to the UK for the purpose of making “qualifying investments”.
A Non-Dom Investor who brings overseas income and gains to the UK to invest under this relief will still be able to claim other tax reliefs such as tax-free capital gains, loss relief and inheritance tax relief on SEIS and EIS qualifying investments, if the conditions for such reliefs are met.
There is no limit on the amount of relief that may be claimed in any tax year.
Under the BIR legislation, a qualifying investment includes an investment in an unquoted company which carries on a trading activity on a commercial basis. Qualifying companies for SEIS and EIS purposes are likely to be qualifying investments for the purposes of the BIR regime. However, what counts as a qualifying investment for the purposes of BIR is broader than what counts as a qualifying company for the purposes of the SEIS and EIS (including, for example, property development). A qualifying investment for the Fund will therefore be a company which is both a qualifying company for BIR purposes and a qualifying company under the EIS.
Type of Investment
A Non-Dom Investor makes a qualifying investment if shares are issued to such individual by a qualifying target company. Alternatively, the investment may be made into (UK or non-UK) companies which hold shares in, or exist wholly for the purpose of making investments in, other companies provided that the underlying company carries out a business activity and is UK resident or has a permanent establishment in the UK. There is a requirement that 51% plus of the underlying company be held by the holding company in which the Non-Dom Investor makes their investment.
The BIR legislation also requires that:
- any Non-Dom income or gains used to make a ‘qualifying investment’ must be invested in a qualifying business within 45 days of being remitted to the UK; and
- the Non-Dom Investor and other relevant persons have not obtained (directly or indirectly) or become entitled to obtain any related benefit, or expect to obtain any such benefit as a result of the investment.
The 45-day Period
On a disposal, it is a requirement for Non-Dom income or gains that have been remitted to the UK (up to the amount of the investment) for investment in a qualifying business to be either taken out of the UK or reinvested into another qualifying business within 45 days of disposal of the investment. This 45-day time limit will apply from the point at which the funds are unconditionally available to the individual or any relevant person. Any profits or gains arising from the qualifying investments may remain onshore on a tax-free basis.
It is intended that all qualifying investments into, or out of, an eligible Investee Company will be treated as an offshore transfer rather than a payment under a mixed fund. The effect of this will be to treat the money used to make the investment, and funds received from the investment, as containing the same proportion of income, gains and capital as was in the Non-Dom account immediately before the investment was made.
A further requirement will be that the Non-Dom income or gain used to fund the qualifying investment is identified with the first amount of disposal proceeds until the total amount invested has been matched. This means that, in general, a Non-Dom Investor will not be required to take chargeable gains which arise on disposal out of the UK in order to benefit from the relief.