| Happiness is a tax rebate! | | | | Capital Gains Tax until their new EIS shares are |
| The money back is your own hard-earned | | | | sold. This benefit can be particularly advantageous, |
| cash...so the good feeling grows. | | | | as the value of these shares becomes exempt |
| UK income tax payers can claim a rebate via E.I.S. | | | | from Inheritance Tax after just 2 years. |
| (the United Kingdom Enterprise Investment | | | | A company seeking investment should consider |
| Scheme). | | | | various exit strategies that will enable subscribers |
| EIS entitles them to money back when shares | | | | to realise their investment (plus any capital gain). |
| are bought in a company approved by Revenue | | | | For instance, the business could buy back shares |
| & Customs. Every £500 invested | | | | for subsequent purchase by (or free issue to) its |
| produces a £100 tax refund. There's an | | | | Staff. An employee-owned partnership will usually |
| investment limit of £500,000; potentially | | | | perform better for ALL its shareholders. Robert |
| returning £100,000 from income tax | | | | Townsend's classic book "Up the Organisation" |
| already paid. More than enough for most of us! | | | | extolls the virtues of employee share ownership. |
| The Scheme was devised by British Government | | | | If the business model is that of a franchising |
| to bridge funding gaps created by the major | | | | operation, a requirement to buy existing shares |
| banks unwillingness to finance small trading firms. | | | | can be a condition for Franchisees being granted |
| EIS approved businesses are now encouraged to | | | | their licence. EIS shareholders then have an |
| fund their growth by offering people a highly | | | | ongoing source of buyers with whom to negotiate |
| tax-efficient investment. | | | | the value of their stake holding. Franchisees |
| Reward and risk are inextricably linked. An | | | | thereby take on a commitment to the continued |
| individual's investment portfolio needs to account | | | | success of the whole enterprise, not just their |
| for both, but EIS shares have a head start | | | | own domain. |
| because of their unique advantage; a 20% tax | | | | As many other forms of investment consistently |
| rebate. | | | | under-perform, it's appropriate to take a fresh |
| An investor should select an E.I.S. approved | | | | look at the tax advantages offered by an |
| company on many criteria, not just the tax | | | | Enterprise Investment Scheme. All previously |
| benefits which accrue to all Enterprise Investment | | | | perceived 'risks' need re-assessment, based on |
| Schemes. Any potential return on investment | | | | experiences 'gained' from the latest Stock Market |
| (ROI) needs to be balanced against whatever risk | | | | crash. |
| there is to capital subscribed. | | | | Large corporation share values have fallen |
| Due diligence should be undertaken, appropriate to | | | | dramatically. Capital invested in a well-managed |
| the level of funds being subscribed and expected | | | | small company can be a profitable asset; |
| ROI. | | | | especially tax advantageous EIS shares. |
| Prime considerations for investors include: | | | | Costs for acquiring EIS shares can be negligible; no |
| - How long has the business been actively | | | | brokerage charges apply if the investor deals |
| operating? | | | | directly with the company issuing the new shares. |
| - In what kind of market does the company | | | | Administration is minimal; their 20% tax refund |
| trade? Cutting edge; more risk? Long established; | | | | being reclaimed via the investor's Self |
| less growth? | | | | Assessment form simply by presenting Form EIS |
| - How long have the Management been | | | | 3. |
| employed? Are they shareholders themselves? | | | | Rules for qualification by potential investors and |
| - Does the firm have a competitive advantage? | | | | companies seeking investment are available from |
| One that will endure for at least 3 years? | | | | HM Revenue & Customs in the UK. The |
| - Dividend earning potential should be assessed; | | | | website of ACCOLADE plc has several pages of |
| balanced against possible share value appreciation. | | | | background information as well as a Prospectus |
| Subscribers re-cycling profits made from other | | | | for their own Enterprise Investment Plan. |
| investments can defer an unlimited amount of | | | | |