Venture Capital Trusts, Film Partnerships and Other Investments

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These types of investments are often referred to as alternative investments. Generally speaking they offer attractive tax benefits, but consequently carry higher levels of risk. They are aimed at more wealthy individuals.

A Venture Capital Trust is a collective investment vehicle quoted on the London Stock Exchange. They invest in small unquoted companies. Income tax relief at up to 30% is available (if shares are held for more than five years) on up to £200,000 of investment in each tax year. Tax free dividends and exemption from capital gains tax is a feature.

The Secretary of State for Energy and Climate Change has announced an early review of Feed-In-Tariffs (FITs), which may have an impact on investments made by certain VCTs and EIS investing in clean energy projects. The FITs review will:

• Assess all aspects of the scheme including tariff levels, administration and eligibility of technologies
• Be completed by the end of the year, with tariffs remaining unchanged until April 2012 (unless the review reveals a need for greater urgency)
• Fast-track consideration of large scale solar projects (over 50kW) with a view to making any resulting changes to tariffs as soon as practical, subject to consultation and Parliamentary scrutiny as required by the Energy Act 2008.

We will post further news on this review when it emerges.

A Film Partnership Scheme has the potential to offer tax deferral opportunities. The amount subscribed counts as a tax loss. A gradual repayment of the tax due to HM Revenue & Customs is made from income generated over a 15 year period. The tax saving made must generate a positive return of around 4% per annum for the arrangement to be beneficial.

Enterprise Investment Schemes offer direct investment in small unquoted companies. Income tax relief is available at 30% (up to £500,000 invested per annum - which can be carried back to the previous tax year) and unlimited capital gains tax deferral. They are exempt from capital gain tax and free from inheritance tax (after two years). Specialist managers offer funds and portfolio services investing in qualifying companies to spread investment risk.

Forestry investment offers capital gains tax exemption and capital gains tax rollover relief. Investments are free from inheritance tax after two years and income generated is exempt from income tax. Investments are by their nature illiquid. There are a limited number of Forestry investments funds, offering access to a portfolio of plantations at more manageable investment sizes.

There are many tax advantaged alternative investment schemes. Substantial tax advantages often mean higher risk and illiquid investments. If you are a higher net worth individual and would like to explore these opportunities further, please contact us.