Growth EIS Fund

The Committed Capital Growth EIS Portfolio Service is an evergreen fund offering investors the opportunity to invest on a into a portfolio of 8-12 actively managed, growth stage, post-revenue  (over £1m) technology companies, whilst also benefitting from the availability of the generous tax reliefs afforded by the Enterprise Investment Scheme.

Investment Objectives

We are a growth stage venture capital investor, and our investment strategy has remained unchanged since 2001.

We invest in best in class high growth, EIS qualifying post revenue technology companies (over £1m+) in a range of industry sectors where we believe the potential for significant capital growth exists, and where we can offer hands-on support to facilitate and accelerate growth before ultimately helping identify potential exit opportunities.

Investment Strategy

Our investment strategy is based on the principle of offering support to portfolio companies to unlock and accelerate profitable growth. In analysing potential investee businesses, we look for rapid growth in the underlying market and a technology and business designed to accelerate this growth.

Our investee companies must have a clear and compelling product or service offering, be fully formed, and have strong management. These factors are established during an exhaustive due diligence process.

Investments are selected based on the following criteria:

Dynamic Market – substantial fast growing addressable market with low competitive intensity

Well-Positioned Company – strong management team, robust forecasts for rapid growth over the investment period and clear potential for exit.

In-Demand Product (or service) – fully commercialised, addressing a clear market need, with a sustainable competitive advantage.

Post Revenue – generating significant sales of over £1m annually.

Investor Protections – a significant minority (often 20-40%) of the equity sought, and a board seat and investor rights required.

HMRC Advance Assurance – this is required before deployment of capital.

Key Features

Minimum Subscription
£15,000

Target Return
2-3x ROI (excluding tax reliefs)

Deployment
We aim to invest subscriptions within 6-12 months of investment, into a portfolio of 8-12 companies. If you prefer to be invested in a shorter timeframe into a potentially smaller portfolio, we are happy to do so under your instruction.

HMRC Advance Assurance
We always ensure this is received before capital is deployed.

Regional Investors
We seek out innovative, high growth investee companies throughout the UK.

Exit Strategy
The intention is to exit within 4 to 5 years of monies being invested via trade sale, IPO, or where appropriate, a sale to a strategic investor.

Historically our exits have been achieved through a trade sale or sale to a strategic investor. More recently, sales to financial investors have also been completed.

 

What is the Enterprise Investment Scheme (EIS)?

Set up in 1994, the EIS is a well-established UK government scheme offering generous tax reliefs to investors in small growth companies. EIS is designed to help smaller companies raise finance by offering a range of tax reliefs to investors who purchase new shares in qualifying companies.

What tax reliefs are available?

Depending on individual circumstances, investors can enjoy some or all of the tax benefits noted below.

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Income tax relief at 30%

You will receive 30% tax relief on the amount invested in EIS qualifying companies against your income tax bill for the year of investment, up to a maximum of £2 million invested (provided that any amount above £1m is invested in Knowledge Intensive Companies). In addition, if you want to treat some or all of the shares subscribed for in the current tax year as though they were subscribed for in the previous tax year, then you may do so up to a further £1 million (reduced by any EIS investments already made in that tax year).

Please note, with regard to our Committed Capital EIS Portfolio Service, not all of your investments will necessarily fall in the tax year of investment unless you instruct us otherwise.

Capital Gains Tax (CGT) Deferral

CGT, such as from the sale of shares or a second property, can be deferred for the life of the EIS investment. You can defer any gains made in the three years prior to, or the year following, the date your subscription is invested into EIS companies.  There is no limit to the amount of gains that can be deferred for CGT purposes.

100% Inheritance Tax Exemption

The companies in which we invest also qualify for Business Property Relief. This means that investments made through the Committed Capital EIS Portfolio Service can be exempt from inheritance tax (IHT) after just two years (from the point at which the investment into the underlying EIS company is made). In order to qualify, the investments must also be held at the time of death.

Tax Free Growth

All capital gains made from EIS investments are tax free (when held for the minimum 3 year holding period). Given the higher returns targeted by the Committed Capital EIS Portfolio Service, this is an important tax benefit, allowing investors to include smaller companies in their investment portfolio in a highly tax efficient manner.

Loss Relief

At the current rates of income tax, up to 45% loss relief may be available on any holdings that are realised at a loss net of initial income tax relief, helping to offset the effect of any assets which underperform in the overall portfolio. For a 45% taxpayer this would provide total tax relief of 61.5%.  The investor can choose whether to set the loss relief against other gains made now or in the future, or against income for the year in which the loss arises or the previous year.

The above tax advantages can only be claimed when the investors’ funds have been deployed into a company, rather than when an investor makes an initial subscription.

The above does not constitute tax advice. It is recommended that investors take independent, tax, legal and financial advice from a qualified professional adviser before considering an investment.

Are you a UK resident non-domiciled investor?

The Business Investment Relief (“BIR”) qualifying Committed Capital EIS Growth Fund is designed for UK resident non-domiciled individuals and enables eligible investors to keep gains onshore once those investments have matured. The Fund has an offshore account to ensure that the 45 day remittance rule is strictly adhered to, to avoid any remittance charge on any uninvested funds.

Below, we explore how UK resident non-domiciled individuals can bring remittance basis foreign income and gains into the UK without triggering a tax charge and benefit from generous additional tax reliefs.

UK resident non-domiciled individuals are generally subject to UK tax if they remit funds to the UK.  A ‘UK resident non-domiciled investor’ is a non-UK national who is living and working in the UK, and therefore paying tax in the UK.

BIR was introduced by the Government in April 2012 to attract more overseas investment into UK businesses. The relief works by allowing remittance basis foreign income and gains to be brought into the UK without triggering a tax charge where the funds are used to make an investment into certain qualifying businesses, which includes EIS qualifying companies.

There is no limit on the amount that can be brought to the UK and on which BIR can be claimed.

The investment must be made within 45 days of the foreign income or gains being brought into the UK to avoid triggering a taxable remittance.

To claim the relief, a claim is made on the individuals Self-Assessment tax return for the year in which any investment is made.

One such qualifying investment, is an investment into a private limited trading company.

Interaction with other tax reliefs

BIR can also be used in conjunction with other tax reliefs such as the Enterprise Investment Scheme (EIS), Entrepreneurs Relief (ER), and Business Relief (BR) which provides relief from Inheritance Tax (IHT) to maximise tax relief.

Combining BIR which offers a tax saving of up to 45% for additional rate tax payers, with 30% income tax relief, tax free growth, the ability to defer other capital gains, IHT relief and loss relief against income or other gains should a loss arise on a qualifying investment,  provides the opportunity to use monies ring-fenced from remittance to the UK, to invest extremely tax efficiently and reduce the tax payable on UK income and capital gains.

The BIR qualifying Committed Capital EIS Growth Fund is also designed for UK resident non-domiciled individuals and enables eligible investors to keep gains onshore once those investments have matured.  The Fund has an offshore account to ensure that the 45 day remittance rule is strictly adhered to, to avoid any remittance charge on any uninvested funds.

 

The result?

The interaction of BIR and EIS provides ‘UK resident non-domiciled investors’ with an extremely tax efficient way to bring money onshore by: 

  • avoiding a 45% remittance charge;
  • providing 30% income tax relief on up to £1m of investment or £2m for knowledge intensive companies provided the investor has sufficient earnings subject to UK income tax to utilise the relief available;
  • providing business Relief – Inheritance Tax exemption after investment held for 2 years (potential saving of 40%);
  • CGT deferral on other chargeable gains made up to 12 months before or 36 months after the investment is made; and
  • if any loss were incurred on the EIS shares, investors can choose to offset such loss, less the income tax relief received, against their income tax bill for the tax year of loss or previous tax year. So, an additional-rate taxpayer could effectively reduce a total loss of £1 to 38.5p.  Alternatively, investors can choose to claim loss relief against capital gains arising in the tax year of loss or carry forward the loss and set it against any future gains.  Tax free growth on investment.

Growth EIS Fund Fees

Please see below for details of the fund charges.

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Initial Charge

There is a charge of 1.5% +VAT to cover set up and administrative costs, calculated on the investment into the portfolio service less any charge agreed between the Investor and the Adviser, and where this is facilitated from the investment.  The net amount is the Managed Amount.

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Annual Management Charge

There is an annual management charge (“AMC”) of 2% +VAT applied to the Managed Amount.

Please note that an amount equivalent to the first 3 years’ AMC’s will be calculated at the outset and be held back in cash together with the Initial Charge in the clients account and will reduce the amount invested into investee companies. This will affect the final value of the clients’ investment and the tax reliefs available.

In years 4 and 5, the Managed Amount will be reduced by any investment returns (at cost) made to the client and the 2% charge will be accrued until returns allow the charge to be paid.

To the extent that the client has funds that remain invested after 5 years, no annual management charge will apply.

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Performance Fee

There is a performance fee payable equivalent to 20% of the profits returned in excess of the gross amount originally invested by the client into the Service (excluding all tax benefits), plus VAT where applicable (the “Gross Investment Amount”).  Once the clients Gross Investment Amount has been repaid to them, the performance fee will apply to all consequent investee company exit proceeds.

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