Daniel Partridge

It’s an interesting subject, particularly at this current time, we’ve got volatile investment markets, I think these are investments that offer something different, probably mainstream investments, although there’s a number of considerations with all of them, hence the webinar.

Adrian Mee

Yeah, I mean, these are four things that we’ve come across in our careers, I mean, you started at the same time as me 2001. So these have been around for some time. It’s just very, very difficult to know when they’re right for you as the as the client and as the investor.

Daniel Partridge

Yeah, absolutely. Because they’re very specific types of investments. Certainly, they provide substantial tax benefits, but at the same time, there’s an element of risk with all of them, and they perhaps sit at the higher end of investment risk, to a greater extent. So it’s something where you certainly need advice, before making any investment decisions with these investments, but as we say, they are four great alternatives to pensions.

Adrian Mee

So, just the start process disclaimer. So this is not to be construed as direct advice to yourselves as delegates. This is pure guidance at this stage, you can contact us naturally for formal advice. So we will have the four sections about us the topic itself, q&a at the end, and then your next steps. So just little about us. New photo shoot for WKM this summer, there’s no seven of us. We’ve got the four advisors, and then Ben Wattam and Loz and Ben Toms, all part of the team, basically servicing clients as we go. So independent, highly qualified professionals. We’re all chartered, in our various fields. I mean, we counted this up, and it’s over 80 years now of total professional experience.

Daniel Partridge

Yeah, I think I’ve pushed that up a little bit further as well.

Adrian Mee

Yeah, it’s scary when it cracks, almost 100 sort of number. But this is our passion. This is what we do. And this is why we’re professionals in this space, who we’ve chosen to work alongside with are those who want to fully engage in financial planning, which are you the delegates, and thank you for turning up this morning. I’ll start the section then I’ll pass over to Dan, and then vice versa. But we’ve got the four alternatives, which will be no surprise to some of you for, venture capital trusts, enterprise investment schemes, business relief investments, and then aim inheritance tax efficient investments. So just to start with venture capital trust, venture capital. This is capital that you invest, wanting to support not fledgling businesses, but sort of new startup businesses. You can think of brands such as I’m not sure why alcohol always springs to my mind, but if you think of the brand, fever tree tonic waters, BrewDog beers, they all started as venture capital sponsored businesses, whereby they wanted capital from the general public. You get a tax relief for making that investment. So at present, it is 30% income tax relief available, and all of your income is allowed to be tax relievable, which is quite different when you think of pension contributions where it’s a very specific element of your income that’s relievable for tax. You have to hold the investment for five years. But as this is how personally you can sell it after five years, keep that 30% tax relief and keep all of the gains, the gains come to you from a VCT as ongoing income primarily. So it’s a dividend paid from the VCT manager to you. Ordinarily clients elect to receive that as income. But if you don’t need the cash flow, you can opt for additional shares and that same VCT. Now, an additional share subscription doesn’t get you any more 30% income tax relief. But if you think of how these businesses flow with valuations, getting shares as you go in lieu the dividend can be a fantastic benefit, because when you come to the back end, their capital gains tax free as well. So they sit quite nice in planning. They do sit inside of your estate. So the quite odd thing here is you can have VCTs investing in AIM shares, now aim shares are ordinarily exempt from IHT but in a VCT wrapper they’re inside. Your limited to £200,000 a year worth of an investment. And again, they certainly sit as five out of five for investment risks because it’s it’s venture capital. Quick example. Mr. Clough, I’m a Nottingham man so I’ll choose my own example cases. He has income from his basic state pension of £9000 a year, £41,000 from his football league pension, £50,000 in total. Very, very quick tax bill of £7,500 a year. He has decided to make a VCT investment for £25,000. That triggers a 30% tax relief. That gets him £7500 back on his self assessment return, which nicely offsets all of the income tax bill he has from receiving his pensions in payment. He expects from the VCT a tax free dividend of £1500 a year, and he elects to receive that as income for himself to bolster his income position. He is comfortable that the investment is volatile. Because importantly, Brian has handled his cash flow correctly. He doesn’t need this cash back for five years. Over the next five years, he will place subsequent VCTs every year. So he’ll place £25,000 a year into new VCTs that are issued that fully offset his income tax bill for that year. Over the five years, he’ll create £37,500 in tax relief, and his annual dividend will gradually build up to what we expect to be £7500 a year. At year six, the first year VCT has technically matured, and he could sell that and then buy another VCT, a different VCT and get a further 30% relief. So once Brian’s committed his capital £125,000 over the first five years, he doesn’t need to commit any more capital. And even if the capital just stays exactly the same and static. At year six, he can start to sell and buy back to trigger another 30% relief. And again, legitimate bonafide planning that can work really well.

Daniel Partridge

Yeah, so similar to VCTs. Enterprise investment schemes are another tax incentivized investment that operates in a similar way, but have a different set of rules applying. So like within a VCT if you invest into an EIS you have 30% Income Tax Relief at outset. There is another version of an EIS called a SEIS, so whereas the EIS invess into startup businesses, smaller businesses, SEIS invest into even smaller businesses, micro businesses. So effectively in that circumstance, we provide you with 50% income tax relief, because you are invested into a very, very small seed business, but obviously there’s a lot of investment risk associated with that, so significant tax reliefs, but at the same time, a significant risk. Now, one of the advantages that EIS provides that the VCT doesn’t provide is CGT rollover relief. So this means if you have a capital gain, you can roll that capital gain over into the EIS investment itself. So, if you have a capital gain, if the equivalent amount of gain is invested into an EIS that will effectively defer that CGT liability for the lifespan of the EIS. Now, again with a SEIS, one of the advantages is rather than just rolling over the capital gain, it’s a write off of that capital gain in full. So effectively if you invest into a SEIS and bearing in mind, there are some additional investment risks involved with that, will actually write off your CGT liability in full, as long as the investment is commensurate with that liability. In addition, because you are taking some additional risks with an EIS investment, even more so than perhaps a VCT, you also qualify potentially for loss relief. So effectively if the investment turns bad, fails ultimately, after the investment term, then you can claim loss relief and the level depends on your rate of income tax at the time. So there is a further relief available if the investment does fail. The other key differences to a VCT is the investment sits outside of your estate for IHT purposes. So inheritance tax state purposes after two years. So it qualifies for business relief after that two year holding period. So it’s another significant advantage of the EIS. So there are all of the positives, the advantages of the EIS but also we need to consider the practicalities of an EIS investment. There’s quite a large maximum investment of £1m that you can put into an EIS each year. A seed EIS investment is £100,000 per tax year. Now, if you remember from Adrian’s slide, you had to hold a VCT for five years to retain the tax relief, the initial income tax relief with an EIS, it’s three years. So it’s a much shorter period than the five years from a VCT. But the reality and the practicalities of an EIS because you are investing into a small business, a growth business, the reality is that many of them don’t exit until year four or year six. So although the terms of an EIS say you can actually sell out from year three. The reality is you probably can’t actually liquidate your investments until probably between years four and six. In terms of investment timescales you need to bear that in mind. I think one of the important factors within an EIS is to consider the risk side of things. So unlike a VCT, it’s a growth orientated investment. EIS can be a single company investment, so purely investment into one specific business. Or it can be a fund based approach where the managers selects a range of possible companies to invest into. And again, that can alter the risk scale because of diversity or lack of diversity. We’ve scored an EIS as a five out of five for investment risks, but actually, I’d probably say if we score the VCT at five out of five, there is a higher level of investment risk with an EIS because of the growth orientated aspects.

Adrian Mee

It’s smaller businesses, and it’s fewer of them inside that tax wrapper so it probably deserves to sit at 6/5 for investment risk.

Daniel Partridge

Absolutely. So we just move over to an example. Our client Liz T, similar to Adrian’s example, let’s just looking at her background position. So she draws an annual income of £100,000, which is combination of PAYE and dividend income. So annual tax bill is just over £21,000. Liz also has a capital gain of £25,000, which is over the annual CGT allowance for the current tax year. So after taking advice, she makes an EIS investment of £25,000. So that provides, same as VCT’s, £7,500 income tax relief, again, like a VCT that income doesn’t have to be relevant it can. So if you make a pension contribution, you have to have relevant income, salary, profits, etc. So this could be for instance, rental income that you can claim the relief from. But in addition to that, the £25,000 that’s invested. And conveniently, the £25,000 capital gain that Liz has made can be deferred, so it can be deferred over the period of the EIS investment. We’ll look at that in a little bit more detail. Liz is of course comfortable with the risk associated with the EIS. But in terms of the CGT gain, that by investing into the EIS, there’s no CGT liability crystallized, that’s the third over the term of the EIS. What Liz can then do is effectively as she sells down the EIS in the future, she can use her annual CGT allowances to basically nullify that gain moving forward. And as long as Liz remains invested into a qualifying EIS, because you can roll over into a new EIS once the first ones matured, you can effectively reduce that gain to zero over a period of time.

Adrian Mee

I really like that planning, she started off with a profit of £25,000, chunky tax bill. And ultimately, over the next three years, it’s going to get wiped out. So if the EIS does absolutely nothing in performance terms, she’s saving all of that gain, which are subject to tax. Even if it loses slightly, she’s still got some loss relief to throw at it.

Daniel Partridge

We generally see VCTs working where clients want to generate an ongoing income particularly where they are a higher or additional rate taxpayer, because those dividends are tax free. And you obviously get the tax relief at outset. The EIS is very useful when you have an income tax liability that you can relieve but you also have a capital gains tax liability, as well, on that basis. But as we’ve said, we must consider the risk considerations with an EIS investment because you are effectively invested into a smaller business and perhaps one that doesn’t necessarily have a lot of diversity.

Adrian Mee

I mean, this is sort of why we research into who we want to be providing the EIS ventures because naturally EIS by its nature, the underlying companies you invest into change every single tax year, because these companies will be subscribing for new share capital, and in other years, they won’t be. So the ones that we like are the ones that try and diversify that within the EIS rulebook as much as they can to minimize that risk. So you want to be very careful. If you’re going into the EIS world alone, that you’ve got exactly the right risk to reward ratio. So notching up the tax relief scale, we now move away from income tax and capital gains tax, and we’ll move more into inheritance tax. So effectively, what we’re looking at with the third option, are AIM share portfolios, AIM shares are listed on the London Stock Exchange under the alternative investment market index. So again, they’re quoted companies, they have due diligence to shareholders and investors. So these are very much, you know, not mature businesses, but they’re certainly heading towards that way. AIM shares qualify for business relief rules. Effectively under business relief rules, the underlying investments, they must qualify, but if they do qualify, you’re protected from inheritance tax, which is super interesting, because if you’ve got a mature portfolio of shares, and you’re taking risks anyway in the market, then maybe if you look at the AIM market as a comparable, you will then be saving your beneficiaries 40% inheritance tax, if your plan is for them to inherit that portfolio, and it can work really well. If you’re selling your company, and the benefit of having your own business, yes, you’re your own boss, but also nine times out of 10 the value of your company shares is exempt for inheritance tax. But when you sell it, all that cash is then subject to inheritance tax. But if you take those sale proceeds and use what we call rollover relief, you can roll those sale proceeds into an AIM portfolio and carry over that inheritance tax exemption. So it sits really well to yes, continue to have your money invested and hopefully hoping for investment growth, but also saving the inheritance tax exposure.
Yes, it’s a big issue. We know from clients that sell businesses having the value that business outside of their estate is a significant benefit but on business sale that changes significantly.

You don’t need to make a decision straight away. We have clients who sell their companies and quite frankly, they don’t know what they want to be doing in retirement. You have three years to take advantage of this rollover relief, so you can park the funds in cash temporarily. Yes, you’re exposed IHT if anything happens within that period, but then you can use rollover relief and go again. So there’s a point around here called legislative risk, that every tax year, we get the same stories in mainstream media that the government need to pay out less in, in tax reliefs. So therefore, things like tax free cash on pensions are always thrown into question. It’s been the same for 20 years. The same for AIM shares, the government will remove the inheritance tax exemptions against them. And it is an additional level of risk you have to think about as an investor, as well as the inherent investment risk. So I had Mr. Clough, I naturally now have Mrs. Clough, different agenda, she’s 80 years old. She’s concerned of a few things in life. One that her grandchildren whom she would like to pass money to, because in her own words, her actual children have benefited enough from her. She wants them to benefit from some of her estates. But because she’s over the allowances, they’ll be paying 40% inheritance tax, which she doesn’t lile. In the back of her mind, she’s also got the concern that she might need this money herself, with inflation going up and the prospect of maybe needing, you know, later life care being pretty expensive, she doesn’t want to give everything away. And also, she’s sort of concerned that she might not survive seven years to give the money away. Because if you die within seven years of the gift, it can be taxable at inheritance tax rates. So other concerns, she doesn’t like the grandkids having access to £50,000, but the reality is that they’re gonna get it eventually, but she wants to hold on to it for the time being. So she’s thinking of ways in which she can minimize the inheritance tax on ultimately giving her assets to her grandchildren, but not giving them to them yet. And her kind of background, she’s got £100,000 of existing ISA’s in play, which is currently in a very kind of medium risk stock portfolio. So supergran, would like to actually put half of her ISA portfolio into AIM shares. And she does that by using an AIM Portfolio Manager which we have selected for her. The investment retains all the tax benefits of an ISA. So income and capital gains, tax free returns, the capital value of that now AIM portfolio inside the ISA’s is volatile. She’s happy ish because while she does look at the values, every so often, the fact that she’s investing these for her grandchildren means that it’s their timeline that’s taking the risk. Once they’ve inherited them, they will continue to own those shares, they won’t need to sell them at probate point, they’ll simply inherit them. And because there’s no inheritance tax, they won’t need to worry about any liquidity management. So with good advice, the grandchildren at that point can continue the investment.

Daniel Partridge

That’s another good point, because perhaps compared to the EIS and the VCT. Use those for different purposes. But there’s a lot more liquidity on the market than perhaps is in those other investments.

Adrian Mee

You’re looking at the kind of chunky income tax rates and capital gains tax rates being available for those less liquid if that’s the right way of saying it, those smaller company type shares. These are mega businesses that have lots of liquidity pursuant to their current share price. So you never want your planning to be backed into a liquidity corner. But these are great investments to have. Again, if you’re starting with a standing start, you need to have the AIM investment in play for two years to be able to qualify from the inheritance tax relief. But again, if you have maturing proceeds from a business relievable asset, maybe the company sale, EIS, SEIS or another type of business relief asset. You haven’t got a two year wait proceeds go from one into the other. It’s quite handy.

Daniel Partridge

Great okay, so we’ve come to alternative four, which is perhaps I would say is the highest risk of the four. And unlike the others perhaps, it is for a specific purpose which is inheritance tax and estate planning. So, business relief investment solutions, so these investments are based around business relief and business relief is what a trading business obtains against inheritance tax. So if you think of your sort of typical family business, that trades, if parents pass away, that asset can move down to the other family members children, and there’s no inheritance tax. And the idea of that legislation is it stops inheritance tax being applied to smaller businesses. So the value isn’t diminished, and the business doesn’t effectively fold. So business relief investment solutions use that legislation by investing into assets that qualify for business relief, and therefore give the investor an inheritance tax exemption. Like Adrian explained for the AIM shares, there is an initial qualifying period of two years where you have to hold the investment after those two years, it would be outside of your state for inheritance tax purposes. However, if it’s a business sale, you can claim rollover relief. So effectively, if you’ve sold your business, those funds were previously qualifying for business relief, and therefore outside of your estate, if you sold that business, it’s now cash. Well, that’s in your estate. But if you invest into a business relief investment, that qualifies, that amount will be automatically outside your estate, again, for inheritance tax. So you’ve quite a significant advantage. Looking at the practicalities of these investments, well, what do they invest into, they invest into a range of investments, generally, they qualify for business relief. So things such as forestry, hotels, renewable energies, wind farms, that type of thing. All of these investments at the moment in the legislation qualify for business relief, and therefore, the underlying investments that sit within these solutions invest into those assets, you then qualify for business relief. There is a difference between some of the options available, some are very much self select. So you as the investor select what you want to invest in, so you can pick whether you investment into forestry, or you can pick whether you invest into renewable energies, obviously, they provide a different return profile, and perhaps different levels of risk as well. Or you can defer that to the manager. So the manager takes a discretionary approach, and manages it much in the way of a sort of investment fund and will select the types of investment that you invest into. There’s obviously risks associated with both. And like perhaps the first two examples, the VCT and the EIS, there’s no limits to how much you invest. So you can actually invest a large amount into these investments, we’d always say to clients, diversification is key, there’s a number of providers that operate in this space, so diversifying between providers, is quite an important part of this process. So looking at the risk factors, there’s a number of them. First one is the underlying investment risks. So whether you investment into forestry, whether you invest in into renewables, whether it’s hotels, there’s also an underlying risks that affect those types of businesses at different times. So that needs to be considered. Obviously, one way of managing that is by looking at the discretionary approach. So you defer it to the investment manager to take those risks for you. The next one is, this is what Adrian’s already picked upon, the change in legislation. So to some extent, these investments using the business relief legislation is artificial, because they’re not a trading business that you necessarily operates yourself.

Adrian Mee

This is not a family run business in the true spirit of the entrepreneurs relief legislation, if you will. So it’s been extended into that space. Because yes, you are investing into an unquoted trading sort of business with a manager with a shareholder. And they have been given this so called councils opinion. They’ve been tested by HM Revenue and Customs. But there’s always that tinge I’ve always felt of, you’re extending legislation into a point that maybe wasn’t what was originally written.

Daniel Partridge

Yes, absolutely. It’s fair to say the these types of investments have been around for many years. So they are tried and tested, but legislation can change as we know. And obviously, the planning is very much based around that sort of specific point of legislation. So it is a risk. As I mentioned already diversity of provider, there is a number of providers that operate in this space. And so certainly with larger value investments, it makes sense to diversify. Lower level of investment return. A lot of these investments are based around the inheritance tax estate planning benefits rather than the underlying investment return. So for instance, things such as renewable energies, forestry can provide a relatively low level of net investment return when you take into account the charges of the investment. So don’t expect a strong investment return. It’s more around protecting preserving capital than generating a growth if you like. And liquidity, liquidity is perhaps another key risk aspect of these investments. They are effectively unquoted investments that you invest into, into forestry into renewable energies. So liquidity is a key consideration. So you probably have to go into it with a long term view.

Adrian Mee

These are all unquoted businesses. So the idea is that you’re investing in a family run sort of business structure. So therefore its’ down to the management account valuation sort of basis. And they genuinely smooth the valuations of these companies over time. That liquidity point is extremely key to understanding which option you go with out of these four available.

Yeah, definitely. So let’s have a quick look at an example. Boris’ estate value is £1.5 million, house which is worth £1m and cash is £500,000. He’s lucky enough to have an income from both the state pension and a final salary, DB pension. So his income is sort of fully satisfied by those two sources. So estate considerations, the £1m is essentially free of inheritance tax being the main home as within his nil rate band in his residence nil rate band, Boris is married so he gets £1m exemption there. The £500,000 cash that he has his from a recent business sale the previous year. However, if Mr. or Mrs. were to pass away, at the current time that £500,000 will be now taxable inheritance tax of 40%, £200,000 tax liability, so a significant sum would come off the estate value. So how would a business solution investment help? Well, if we invested into a portfolio of business relief solutions, ie the £500,000 of cash, Boris and Mrs. Boris would obtain BR rollover relief straightaway. So actually, that investment from day one would be outside the estate for inheritance tax purposes. So if they passed away, there’d be no inheritance tax payable, so there’d be a £200,000 tax saving on that investment. If circumstances were slightly different, and the cash wasn’t from a business sale, there’d be a two year waiting period for business relief to qualify. Boris in this example, is comfortable with the anticipated level of investment risk. We’ve also got to take into account the legislative risk of the investment. So if the government decided to change the business relief rules that would significantly impact on this investment. As I said at the start, business relief solutions are very specific to estate planning, they do carry a high level of risk. And perhaps really, they’re only relevant for clients in more advanced years, particularly as they don’t provide much of an ongoing return.

Adrian Mee

The problem is they don’t provide cash flow. So if you are needing access to liquidity as the initial investor, because you have unforeseen expenses come forward, you’re then down to the liquidity position of what you’ve placed. And we’ve come down through that liquidity position as we’ve gone through this webinar today, whereas the final solutions are the least liquid and therefore they will be the most price sensitive to when you need to withdraw your cash. Then AIM portfolios while they have the most day to day volatility, they’re the most liquid. So you know what you’re going to receive when you come to call for unexpected cash. This isn’t really a play on what will create more value, or what will save most tax, because genuinely, for each client, one of these should be the clear solution when thinking about everything in the realm.

Daniel Partridge

Yeah, agreed. So we’ve reached the end of the four alternatives. And I think probably as you’ve picked up from the presentation. Each of those investments can be used for different circumstances. So the VCTs I think, as Adrian was saying, for clients wants to generate a tax efficient income going forwards. Perhaps clients with income tax that can’t be relieved through pension contributions, very effective. EIS if you have a capital gains tax liability, you have income tax that you can also generate some income tax relief from as well. Again, very effective. Looking at the estate planning options, the AIM VCT portfolios, AIM ISA portfolios, and ultimately the business relief solution (BR). They are effective options. But with all of these, there are levels of risks that need to be taken into account. And this is where we get back to the financial planning. They’re certainly investments that can’t be entertained without financial planning, looking at broader liquidity, looking at overall investment risk, and a lot of them you can’t access without financial advice as well, which is probably a good point.

Adrian Mee

Yeah, it’s definitely a point now how strongly regulated these products are, which does give them a lot of credibility that providers will not allow clients to invest off their own back, they want them to be professionally vouched for, which certainly for our key clients, if it sits inside your financial plan, we’ll happily make the recommendation. If it sits outside your financial planner, we don’t think you should be doing it, then we won’t, which is quite simple.

Daniel Partridge

Which I think probably brings us on to the next point is how do we manage this process? Well, we review the market, we select appropriate providers in all of these areas that we think are relevant, have a strong track record. And we’re happy to do that. We refresh that list on an annual basis. And we make recommendations based on your broader financial plan.

Adrian Mee

Definitely. A couple of questions that have come in while we’ve been talking, Dan, this one might be for you. Rishi and Jeremy Hunt, need to raise 50 billion? What’s the danger on business reliefs still being extended?

Daniel Partridge

Yes, that’s a very good question. Interestingly, governments have tended to favor tax incentivized investments such as the VCTs, EIS’s quite significantly and certainly, perhaps more so since Brexit as well, because they’re very efficient ways of putting money into the economy. So if we go back to the growth plan, which perhaps we shouldn’t mention, I think from memory for every pound invested into a tax incentivized investments, it creates £7 of growth in the economy. So there are very efficient ways for governments putting money into essentially UK businesses. So I think the risk to VCT’s & EIS’s is fairly minimal. Even when you take into account the nation’s finances at this point in time, the risk around perhaps business relief is perhaps a bit higher. Because whether they actually provide much sort of inward investment into the UK, they clearly do to some extent, but when you consider the levels of investments and so forth, that is perhaps one that could be more susceptible to change in the future. That said, they’ve been around for 15 plus years. So nothing’s changed over that time.

Adrian Mee

It’s always a case that you have this general cycle don’t you , have political news that comes out that the economy is in poor shape, therefore, we need to contain what we’re paying away, we need to maximize what we’re getting in. And then when recoveries just about to happen. The messaging changes that it’s now about the employers, you are the fuel of the the economy in a guarantee that the Bank of England are in 2009, when we were coming out of the credit crisis, their entire mantra to business owners was that you will employ people, produce goods that will bring the economy forward and out of the current crisis. And those were breakfast seminars that the chair of the Bank of England did around the UK, I guarantee we will start to see those in January, February, next year, that will start to happen. And the government knows that they need to give the Bank of England some sort of platform to sort of speak with. So whipping away tax incentives that are long, slow burns, which as Ben puts it, they don’t particularly create much revenue saving for the country if they pulled them out.

Daniel Partridge

Yeah, totally. And it’s also worth looking on the other side of things as well, there’s huge demand for particularly VCTs/EIS’s, the subscriptions, the amount raised by these providers tend to be fully subscribed or even over subscribed over the last couple of years. And likewise, they’re able to deploy that capital quite easily. So the demand is out there from businesses to obtain this type of funding. So at the moment, I think the risk is pretty minimal.

Adrian Mee

Next question, sort of what happens on death with the three year rule for EIS & VCT, is it encashment at the current value by default? Pretty interesting question from a VCT point of view on death, it is value of the VCT that will be inside the estate. It won’t need to be sold on death, it can be inherited by the beneficiaries of the estate. But there will be inheritance tax due because it is inside the estate.

Daniel Partridge

From an EIS point of view, it gets back to the business relief rules in this this two year window. So if the investments been held for two years or more, that would be exempt from inheritance tax. So be exempted from an inheritance tax calculation. If it’s been less than that. Well, it would be included, I guess, for the business relief solution, same position, the only difference being as if it was from a rollover from a business sale, again, that will be excluded.

Adrian Mee

It’s kind of interesting about the other question that probably branches off from that, the income tax relief the saver got. So what happens down death. And I think that the tax manuals sort of say that as long as the individual didn’t know they were kind of on their deathbed, when they placed the investment, then they’ll be able to keep those reliefs because when someone dies, ordinarily at current, CGT liabilities die with them. So there will be unlikely to be a clawback unless it was extreme planning.

Daniel Partridge

Yeah. And I think that probably the additional consideration there talking around liquidity because the VCT would be readily liquidatable. If that’s the right terminology, EIS, not so much.

Adrian Mee

You don’t really want to sell an EIS before it actually matures itself. If you trust the process, that they know what they’re doing when they’re maturing, your chosen small companies. VCTs, pardon me are just a collection of businesses that all have a different maturity date. So you can time your entry and exit, but with an EIS, you’re sort of a passenger, waiting for it to mature.

Daniel Partridge

Yeah, so for the beneficiaries, perhaps inheriting an EIS investment, it wouldn’t necessarily be realizable at the point of inheritance depending on how far it is through its cycle.

Adrian Mee

And EIS’ do not tend to have a nice straight line progression of investment value. It’s a chunky return at the end, because they don’t know what it’s going to mature for. Next question, I think this is probably one for me, regrettably, is it the wrong time to place a VCT investment due to the current market risk. And I really wish I could tag Ben for this one. But markets have priced in the next 18 months, which is quite eye opening, they have priced in some severe economic recessionary positions for where they think we’re going to be. I genuinely don’t believe that we’re in that painful of a position from a recovery point of view. I think markets have acted very similarly to how I’ve seen the map before in my career, there has been a huge swing in sentimentality, the media tells you to be afraid of inflation, afraid of the future cost of living, and some degree, yes, there is pressure around there, but business will more often than not overcome that pressure. So I think that the time to put your money into unquoted shares or companies looking to subscribe capital is after a market drop off. It feels counterintuitive, but I genuinely wouldn’t sway away from making a VCT investment if it’s part of your five year plan one every year, you’ve got to continue to plan and trust the process. And I think you’ll be very pleasantly surprised when you get to the year six maturities.

Daniel Partridge

Yeah, I’d agree. I mean, it gets back to the financial planning, if it’s part of the financial plan. It’s key to continue that I mean, the tax tail shouldn’t always wag the investment dog. But we’ve also got to remember that these investments have significant tax incentives. So 30% tax relief for VCTs. If that is part of your planning strategy, to reduce income tax liability, then it’s worthwhile continuing that.

Adrian Mee

Case in point one of my clients got a 10% bonus dividend from their VCT they placed three years ago and it was paid last month, which is after the kind of huge positions of market movements that we’ve seen. The VCT managers still felt they could make a bonus dividend payable, so it isn’t always what you see on the surface that belies the power of some of these investment propositions. I think we’re just running tight on time. So next steps. If you would like to contact Dan, myself, or any one of the WKM team, contact information on the screen, you’ll receive a copy of these slides and a watch again link if you’d like to hear us talk about this again. Or please get in touch, email, phone number, website, easy connectability. Our next webinar will be February next year, which is kind of crazy.

Daniel Partridge

I’m sure there’s plenty to talk about.

Adrian Mee

Probably a few new Prime Ministers, chancellors. But thank you, everyone for attending this morning. Really appreciate it. And we will speak to you soon.