Victrex Share Discussion Threads

[hooo flungdung] 30/6/2004 21:48

Hi curry, fountains does indeed qualify for eis - take my word for it. you are too late now though mate - its done & dusted

[currypasty] 30/6/2004 12:21

i think fountains will be too big a mcap for EIS, but ok for VCT



any other Companies placing eligable shares ?

[hooo flungdung] 29/6/2004 14:21

tomrob,

re retrospective claims. in a nutshell yes. ideally a company will have got provisional clearance before the placing, but could try to get eis3 certs for investors sometime after -

once the shares in question are issued by a company the company has the following time limit to submitt an EIS1 form to the Smaller Company Enterprise Centre.

the later of
1) two years after the end of the tax year in which the shares were issued
2) two years after the end of the four months after the start of trade.

(never quite straightforward with the IR!)

if you are thinking of an actual case here and have made an investment that you think may have qualified for the reliefs and think you are still within the time limits to claim them, there is certainly no harm in looking into it. Start by calling the company fd and seeing if he arranged at the time for any other investors to get an EIS3 certificate. You may find he is reluctant to help if not, in that, he will need to supply accounts, mem&arts, placing docs, details of trading activities & of subsidaries etc to the IR. If you are potentially in for a big saving it may be worth appointing a professional adviser who can work with the IR in a matter of days rather than weeks or months. I know the top guy in the uk for this, let me know if you want contact details.

[tomrob] 29/6/2004 11:51

HF,

Just like to add my appreciation to CP's.

Out of interest do you happen to know if a company can apply retrospectively for EIS qualified status?

Thanks again,

t

[currypasty] 29/6/2004 10:28

your doing great !!

[hooo flungdung] 29/6/2004 10:24

woah there. lol. ok,

firstly be careful, eis portfolio service will mean you only are entitled to the reliefs on each bit of capital invested once each underlying investment has been made. sometimes can take a year or so to get you fully invested into a good spread of eiss.

the 10% off last year etc, that is confusing things. the 'carryback' rule is this,

if you make an eis investment in the first 6 months of a tax year you can treat half of it (to a max of 25k) as if it were invested in the previous tax year for the purposes of claiming income tax relief. NOTE that doesnt stop you claiming it in the current year, you just might want to carry back to maximise the reliefs availabe if you dont have enough income tax to soak up in the current year. In fact incredibly few people use the carryback.

So - a normal scenario
Mr smith has a gain of 75k due to asset sold on 1 Aug 2002. He has just discovered eis. If he invests 75k into an eis before 1 Aug 2005 (ie 3 yeard later) he can defer payment of the cgt on it. (in fact can claim back with interest to defer if allready paid). Now suppose he makes this eis investment/s (AND THE SHARES ARE ALLOTTED) throughout 2004 - this now means he also enjoys 15k of income tax relief (ie 20%) in the 04/05 tax year (ie the tax year in which his shares were allotted). assume for this scenario that his income tax liability for the 04/05 tax year is in fact £20k - he reduces this by 15k and ends up only paying 5k in income tax for that year. end of story.

now a carryback scenario
same as above but Mr smith only has £5k of income tax per year. He dosent want to put all 75k into eis in this tax year as he will waste 10k of the income tax relief. instead he invests 50k in current tax year before Oct 5. by doing this 1)he treats 25k (half of the £50k invested before oct 5) as invested in 03/04 and eliminates his 5k tax bill in that year,
2)the remaining 25k is treated as invested in the 04/05 tax year - so he eliminates his 5k income tax bill for that year too
3) he investes the remaining 25k after april 5 2005 (but before 1 Aug 05 deadline for cgt deferral) and also claims 5k income tax relief that year.

hey presto effectively used up all of the income tax relief available rather than waste any.

dam this is not easy to explain over email.

[currypasty] 29/6/2004 09:44

im not sure!
are you saying a single (for example) fund EIS, like Brewins, would be eligable to claim income tax releif in this tax year 04/05, and also provide releif against las years 03/04 CGT? Or if before Oct 5, then knock off 10% off last years tax, and 10% off this ?

If so, the only disadvantage of waiting is I have to pay more cash to IR in Jan next year, for last years income tax, and so is just a cash flow issue ?

[hooo flungdung] 29/6/2004 09:27

ok curry, i think i see where you are coming from.

still not convinced you need to meet the oct 5 deadline, particuarly if your income tax liability in the current 04/05 tax year will be greater than the ammount of income tax relief you may be entitled to by investing in EIS this tax year anyway. if this is the case then no need to carry back. if on the other hand say you want to invest 100k in eis and your income tax liability for the current year is not 20k then yes, you may want to look at carrying back or investing over future tax years (withing your 3 year from date of gain rule) in order to maximise income tax relief benefit.

Glad to help, keep the questions coming if anything comes up in future.

[currypasty] 29/6/2004 08:58

I have a large income tax bill, and a large CGT liability. The oct 5 deadline will give me the half income tax releif at 20%, ie 10%, so its important, but not as important as the 40% CGT deferement releif, which there is plenty of time with, due to gain being realised last year (flogging some Buy To Let properties)
Im already a private client of Brewin, so ill get on the blower to them right away.

If you (or anyone else reading) has knowledge of forthcoming EIS eligable AIM Companies please list.

Thanks again HF for the info. Unfortunately this area is unfamiliar with my accountant, he is doing his best, and mugging up, but the topic probably overlaps tax accountancy, and financial advice!

[hooo flungdung] 29/6/2004 08:42

hi curry,

the main players in the eis portfolio area (in no particular order)

Singer & Friedlander
Teather & greenwood
Brewin Dolphin
Rathbones
Octopus

I think you are saying that you want to invest into an EIS/s before Oct 5 so as to carry back half the income tax relief against last year. Can I just check you are rushing into this for the right reason - ie why have you set yourself the strict time limit? is it because by defering a gain you need to spread about the income tax relief as much as possible to maximise the benefits? or that your 3 year deadline for cgt deferral is up on 5 Oct? if not one of these reasons then not so urgent.

It may be that these providers will tell you what investments they have lined up and will unertake to put you into (say) two of them before your deadline, if you are lukcy you might be able to arrange it so that you get some say as to what you get invested in. expect to pay a 5% initail charge for the access to the dealflow though.

Basically to do it yourself, youre right, youll need to keep a close eye on upcoming new issues, establish whether will qualify (whether by calling the fd, looking in the prospectus or working out for yourself with a bit of help from the SCEC) & then trying to muscle in on the placing through your broker. Not allways going to be easy. Even then can be a hasstle getting the company fd to apply for the EIS3 tax cert, and even then the company may (although rarely) loose its status - prime example Stilo International. Got proper stitched up there I did. lol.

[currypasty] 29/6/2004 08:12

HF, thanks very much, thats a big help. Its just a pity more posters arnt interested !

Ill give SCEC another go !

any links to EIS portfolio providers ?


What im looking for on individual self select are eligable Cos, where i still have time (ie 2 months for half income releif) to get new issue or placing shares. The problem is the lengthy process, ie determine a Co. that qualifies, that is about to place new shares, that has applied for EIS3, and then find out who is doing the placing, opening a client account with them, getting all the money laundering id sorted, and getting on the list... there must be some shortcuts ???

[hooo flungdung] 29/6/2004 08:01

hi Curry,

with regard to finding out if a placing in a company is EIS qualifying (ignoring the public EIS branded offerings found on bestinvest/allenbridge/taxefficientreview), usualy there will be a mention in the prospectus - if not a call to the FD of the investee company should clarify. He will have had to get the 'provisional clearance' from the Smaller Company Enterprise Centre in cardiff (02920 326209).

Agreed the public offerings tend to be higher risk (ie very high risk) - particuarly if startups or single film projects etc. There are some which are more likely to give reasonable but not spectacular returns ie those that have identified areas of asset backing which will qualify under eis, ie pubs, childrens nurseries or garden centres. The vast majority of these public offerings are unlisted though and accordingly a long term tie up for your dosh. Furthermore you have to wonder sometimes why they have come to the public for money if the idea is so good.

re tax, yes income tax relief is applied against the tax year in which your shares are allotted (although you have rightly identify a quirk whereby you can carry back half of your investment (max 25k carried back) if alloted in the first 6 months of a tax year and treat it as if it were invested in the previous tax year for the purposes of claimming income tax relief). Yes also to the fact that you have three years from the date of the sale of an asset that gave rise to a gain to reinvest the gain (or part of it) into eis in order to defer payment of the cgt on it.
Indeed investors with large gains and not so large income tax bills make use of this by spreading the eis investment over all 3 years in order to maximise their income tax relief. (ie not giving rise to more income tax relief in any one tax year than they have income tax liability.)

Re eis funds, forget them, they have too strict a time limit (6months) by which they need to be invested and will often only make a few investments al la McDonald Glencross or Catalyst. not recommended - you might also notice they tend to back only their own offerings. shady. However do check out the EIS portfolio services, offered by about 5 providers. expect to pay around 5% initial charge, 1.5% ongoing annual and a share of any uplift. They are discretionary services although you should be able to show prefrences (ie only aim listed, not tech etc). This will definately give you access to dealflow. If you have enough money to play with they may consider offering you more of a service where you can have final say on if you get put into the placings.

Some recent AIM listings/or share issues by AIM listed companies that have qualified for EIS reliefs for your interest

Cytomyx
Clapham House
Smart Approach
2 Travel
Tellings Golden Miller
BBI
fountains (forthcoming)

Regards,

[currypasty] 28/6/2004 15:55

HF, thanks alot, after a weeks reading every website under the sun, im getting alot more clued up now. A couple of points I just cant get resolved, if you could help..

How do you find out which Cos are EIS registered.. The IR website says follow a link, but no joy, and the SCEC were of no use at all. I would much rather buy shares in an AIM Company, who are simply issuing more shares, than buying some of the taylor made EIS Investments. At least then you can see how they have performed, why they want extra money, and hopefully reduce the downside risk.

I dont understand why you need to make the investment in the current year, to claim income tax relief, but have three years for the rollover relief. Even that is made more complicated by you being able to claim half the income relief of an investment made in the first 6 months of the next tax year.

Bestinvest, and allenbridge have a range of taylor made EIS products, but how do you find out if any are going to be any good. I assume you are more tied into these, than selecting your own EIS AIM individual Cos.

There does seem to be a couple of EIS funds, i think Seymore pierce do one, which are a fund of eligable COs. I assume these may be less risky to a complete loss, and if you did need to sell, and lose the tax benefits, you could.

[hooo flungdung] 27/6/2004 21:22

Curry - yes new issues in aim stocks will sometimes qualify for reliefs, EIS releifs, (basicaly the same as vct before the change on april 5 - ie 20% income tax, 40% deferral, tax free gains, + loss relief (against income!)- which in fact limits your losses to 48% of initial investment (£1 initial cost - 20 income tax relief = 80p net cost. lose all 80p, offset against income, assuming 40p tax payer, 32p back - 32p back+20 inital income tax relief = 52p in your pocket.

be aware though that company will have to fullfil certain criteria in order for you to qualify for the reliefs including but not limited to, gross assets less than £15m, carry out qualifying trade i.e. not property or investment based (although in fact a little more complex), trade in uk.

The investee company will needed to have obtained advance clearance from the IR that the share issue will qualify, and then after submitt an EIS1 from to the inland revenue. a bit of correspondence later and you will get an EIS3 form which will prove to the IR (if they investigate your tax return)that you are entitled you to the tax reliefs you will claim.

By definition then an eis qualifying investment will also qualify for business property relief, ie hold for 2 years (or in fact a coimbination totaling at least 2 years within the 5 years before death) & hold on death & there is NO IHT to pay. NOTE then that an elderley investor with capital gains, income tax and an impending iht problem could invest into a portfolio of eis qualifying investments and in doing so (providing they last 2 years) avoid 40%cgt, 40%iht and get 20% income tax relief - creating an almost free investment for the estate. High risk area by definition of the company you have to invest in, but a no brainer for an investor in this particular scenario.

To an extent you can build up the same exposue through a portfolio fo eis investments as you would be getting from a vct but through a direct sharholding in the underlying companies rather than in the rather cumbersome and illiquid vehicle that is the vct. Indeed before april 5 you would be doing so an be getting similar tax reliefs (in fact better - the IHT benefit and the loss relief benefit and more flexibily in the amount you could invest and the time after a gain you had to defer it) now of course more different. The point is, a company that qualifies for eis investment will by defination qualify as an investment that a vct can make as part of its 70% 'qualifying porfolio'. In fact the critera is basically the same and a company gearng up for a funding round will often get provisional approval for both at the same time from the IR. The main problem in this approach will be dealflow - a lot of the deals the VCTs are getting are of course not public offerings.

Hope that helps. know this area a little too well, let me know if I can expand on anything.

[currypasty] 10/6/2004 20:56

it says here somewhere in the 32 pages that new issue AIM stock has the same tax advantages of VCT's ie 20%, then 40% CGT rollover, then classed as business asset with reguard taper relief, ie 25%... anyone confirm ?

Id much rather pick my own fund of AIM new issue/placing stock than a fund manager

[mangal] 07/5/2004 20:01

At last beginning to see recovery in VCT valuations recently.

A whopping 40% rise today in BSR - which I hold from the frothy days of tech boom - after it announced "that two of the portfolio companies are in advanced stages of negotiation that could led to realisations for the Company in the near future":


I guess there must be quite a few other VCTs which are similarly grossly undervalued and which would begin to rise once they move towards realsing some of their assets.

[timbo003] 07/5/2004 19:29

Pennine VCT (PAV) reported today (I own 4.2K)



Nice (tax free) divi of 2p payable on June 2nd for shareholders on the register on May 21st.

Current share price 58p bid, 63p offer

[timbo003] 07/4/2004 19:01

Northern 2 (NVT) reported final results today (I own 4K)



total divi for the year is 4p, (final divi will be 3p) which is a pretty good return considering it's tax free, current share price 72-92p, horrible spread! Still they only cost me 40p per share, taking into account CGT deferral and income tax relief

[jeffian] 18/3/2004 10:11

A0, agreed again (we are clearly 2 long-lost brothers!). My EIS have been via contacts and, most recently, direct approaches to qualifying companies in which I am interested via private placings. Over years of PET and BES investment, I notice that (in those cases which don't go bust altogether!) the overvaluation of the initial offer is often directly comparable to the tax relief available. The Close Bros. plan to take 40% of any capital gains seemed to me to follow in this cynical pattern.

As for saying what you like about companies without anyone knowing who you are, well, as one of the "10Group11" threatened with a libel action by esteemed (and now ex-!) former Chairman of 10 Group Andy Moore, I wouldn't be so sure. Mind you, you can be as rude as you like provided what you say is true, which is why he is now 'ex-' and I'm still here!

Regards, Ian

[a0002577] 18/3/2004 09:23

Ian - the EIS schemes touted by fund managers are probably not at all a good idea - as you point out. I have invested in several EIS companies BUT none that have been open to a public offer - and I would have invested in these companies anyway - but have just made sure that they structure them in such a way that they qualify under the EIS rules. You have to have a source to put you in contact with such companies and I am lucky in that respect.

As to the catchy nickname - I am a refugee from another brilliant information system which unfortunately closed down and when I transferred to ADVFN they tranferred me under my account number ! Still it does have the virtue of being totally anonymous so I can say what I want about companies I know well without anyone really knowing who I am.

Close Bros. I am a happy investor in some of their VCTs - however, I would not like to raise investments capital from them - cos the companies really do pay through the nose for the capital. Very often above 10% which is why the VCTs are able to pay dividends of about 8 pence per share on the longer running ones.

[jeffian] 17/3/2004 22:06

Agreed, A0002577 (catchy name!), had I not gone the EIS route I would have put it into Close Bros. VCT (not AIM fund). Having said that, I went off Close Bros because I looked into their sole-ownership EIS company. Quelle ripoff! You buy a pub for £1 million; they take all the profit in management charges; if the property asset increases in value, they take 40% of the increase (by value if you don't sell it!). What's the difference between Clos Bros and Gordon Brown? Not a lot, apparently!

Regards, Ian

[timbo003] 17/3/2004 22:03

Agreed, the overall performance of VCTs has not been that impressive, see link below:



But the figures in the link do not take into account the tax benefits, i.e. you can buy £1000 of assets for £400. If you take the tax benefits into account, the figures look considerably better.

I have only ever bought new issue VCTs, and each time I have received a 20% income tax rebate and have deferred a nasty, horrible 40% CGT liability, so I'm fairly happy with all my VCT investments to date, the divis are tax free too!

Given the new rules, which I assume come into effect in the new tax year, I will probably no longer do new VCT issues, I will look at EIS opportunities instead

[a0002577] 17/3/2004 20:46

Culpability Brown is messing about with these again. No wonder the 'industry' wanted the straight option of a higher subscription. They take five per cent. If they had taken 5% off the subscription and then had to issue shares equibalent to that but paid by a tax refund - they would have lost 5% on half the subscription !!!

Totally agreed that only a few VCTS have shown good returns. How many of these were Close brothers vehicles, Ian. My best performers have all been from that stable

[jeffian] 17/3/2004 19:10

I know it's stating the obvious, but do remember the important mantra "invest because you believe it's a good investment, not just for the tax relief". Using the comparative search engine on the Moneyextra site indicates that, over a 3-year timespan, only 4 VCT's have shown any growth at all and over 5 years that only increases to 8 VCT's in total. More to the point, had you chosen one of the 10 worst-performing VCT's you would have lost 60-72% of your investment over 3 years and 40-64% over the past 5 years. In other words, making the wrong choice completely negates the tax-saving and more; almost every other choice shelters your gain but is a poor investment and in only a handful of cases will your tax shelter provide a reasonable return on your funds.

I have a CGT 'problem' this year (a nice problem to have!) and, in the end, decided to go the EIS route where I could research the company and management using normal investment criteria. Still no guarantee, but if it goes pear-shaped I've got no-one to blame but myself and I prefer that to putting my trust in a fund manager (and his charges!).

Regards, Ian