Michael Lansdell: Investment options – thinking outside the box
If you’ve come into money, speak with a specialist dental accountant to explore your options for investing it. Are you ready to look at something a bit different (so, riskier), to other places that can be a home for a windfall?
What about looking at enterprise investment schemes (EISs) or venture capital trusts (VCTs)? Both come with a risk – as well as offering attractive tax breaks. For EISs and VCTs, the rate of income tax relief is equal to 30% of the amount you are investing in and is given as a reduction on your tax bill. Invest £15,000 and your bill will be reduced by £4,500, for example.
The key difference between an EIS and a VCT investment is that EIS tax relief can be taken back to the previous tax year; this will accelerate the tax saving. Also, if you sell or transfer your EIS investment within three years of making it, the tax relief can be clawed back. For VCTs, the clawback period is five years. Another important difference is that dividends from EIS companies are taxable, under the normal rules (dividends from VCTs are tax exempt).
With EIS investments, there is another “carrot” in terms of Capital Gains Tax (CGT) deferral relief, if you have a CGT bill for the year of the investment, or the one before it. You can claim a deferral of the gain, until you sell or transfer your investment (to someone other than a spouse or partner). This incentive isn’t offered with VCTs.
Selling or transferring
As long as you have owned the EIS investment for at least three years, if you sell it at a loss you can use it to reduce the gains from other sales/transfers that year, or in subsequent years. This is not an option if you sell/transfer a VCT investment at a loss. Sell either an EIS or VCT investment at a profit, and the gain is tax exempt.
Nothing is guaranteed, whatever route you go down. It’s all about weighing up risk, good research and pragmatic decision making. Figurit are specialist dental accountants, who don’t just know all the principles of chartered accounting, but are also experienced in working with the dental industry. If you want to do something a bit different with your money, there may be avenues that could be profitable in ways you’d never dreamed of.
For more information, visit https://figurit.com or call 020 7376 9333.