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Enterprise Investment Scheme

Mariana Water Turbines EIS Fully Subscribed – New EIS Coming Soon

Enterprise Investment Scheme

The Enterprise Investment Scheme (EIS) is a UK tax incentive launched in 1994. It is designed to encourage investments in small unquoted companies carrying on a qualifying trade by offering a range of tax reliefs to investors who purchase new shares in those companies.

This scheme is available to UK tax payers only.

We have recently launched an EIS qualifying investment, the Mariana Water Turbines (MWT) EIS. This has been developed to offer investors the opportunity to invest in a renewable energy project that qualifies for the tax reliefs available through the EIS.

There are a number of tax reliefs available for investors in an EIS qualifying structure which are listed below.

Income Tax Relief 

  • Reduction in income tax liabilities amounting to 30% of the total investment up to a maximum of £1,000,000 per tax payer per tax year.
  • Relief can be applied to the current or previous tax year.
  • Relief cannot exceed the amount which reduces an investor’s income tax liability to nil.

Capital Gains Tax (CGT) Deferral

  • Facility to defer paying CGT on all, or part, of a chargeable gain by investing the gain into EIS qualifying shares.
  • Investors can defer CGT by using EIS up to 12 months before crystallizing gains or up to 36 months afterwards.

 Inheritance Tax Relief (IHT) 

  • EIS companies qualify for Business Property Relief (BPR).
  • As long as shares have been held for 2 of the last 5 years and are held at time of death and remain BPR qualifying, the value of the EIS investment will count as part of your client’s estate but will have a nil value for IHT purposes.

 Tax-Free Growth 

  • All growth from an EIS investment is CGT free. Income arising from an EIS investment is not free of income tax.

 Loss Relief 

  • Where an EIS shareholding is sold for a loss (after taking the income tax relief originally claimed on the investment into account), that loss can be set against the investor’s taxable income in the year of the loss. This can lead to an additional tax refund of up to 31.5% of the amount invested.

Please note that to qualify for some of the tax reliefs detailed above you must hold your Investment for at least three years for EIS relief or at least two years for IHT relief.

EIS and renewables

Investing in renewables via EIS has proven popular in recent years. However, in the Autumn Statement of 2014 the Government set out a change of policy for EIS. “All companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from receiving EIS, SEIS and VCT investment from 6 April 2015.” Further to this, the Autumn Statement of 2015 confirmed that, “To ensure the tax-advantaged venture capital schemes continue to provide effective and sustainable support to small and growing businesses, the government will amend the eligibility criteria of the schemes to exclude all energy generation activities.” This is effective from 6 April 2016, so the MWT EIS should not be affected, given the intention is to have all of the funds invested in the Investee Companies before or on 5 April 2016.

Understanding the risks

Please note that your capital is at risk and you may lose some or part of your capital.  You should seek financial advice before making any EIS investment decision. Tax rates, benefits, allowances are based on the current levels, legislation and HMRC practice and can vary significantly from person to person, and the tax legislation is subject to change and cannot be guaranteed. Investment in Unquoted companies is riskier than investing in listed companies as unquoted companies have less liquidity.

For more information of the benefits of investing in EIS qualifying investments, please consult your financial adviser.

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RISK WARNING

The following pages refer to Mariana investment products. It is important that you read and understand the risk statements below before you proceed.

Mariana’s investment products may provide both individual and institutional investors with flexible and innovative investment solutions offering varying levels of risk, asset exposure, capital protection and tax exposure.

It is important, however, that you understand the risks attached to your investments. The key risk factors are summarised below, but please remember that these are general risks and the risks that are relevant to individual products are set out in the brochure for that product.

Mariana does not provide investment advice in relation to investment products and we strongly recommend that you discuss any proposed investment with your financial adviser before you invest.

Investment in a Mariana product should form part only of your investment portfolio. You should also maintain savings you can access at short notice in case of emergency to meet any short term cash needs that may arise during the term of your investment.

Investment Risk – This is the risk arising from the market(s) or asset(s) into which your investment is made or to which the performance of your investment is linked. Their value might decrease, which could cause you to lose money or, if they increase, the amount of the increase may be greater than the return you get from your investment in a Mariana product.

Counterparty Risk – This is the risk that the financial institution by whom your investment is backed gets into financial difficulties and does not, or cannot, pay the amounts due in relation to your investment. This could cause you to lose some or all of your money and any investment returns that would have otherwise been payable.

Term Risk – This is the risk that an investor’s circumstances could change, forcing the early encashment of an investment. Such early encashment will be subject to a fee and the amount repaid is likely to be less than the initial capital invested. An investor should be aware that they may not be able to access the value of their investment immediately.

Inflation Risk – This is the risk that inflation may reduce the real value of your investment over time.

Tax Risk – The values of any tax reliefs generated by your investment will depend on your individual circumstances. You should note that the levels and bases of taxation and reliefs available may change in the future and changes may be applied retrospectively.

ISA Transfer Risk – if you wish to transfer an existing ISA, it must be done in cash. This means that your existing ISA manager will sell your investment and you are likely to be charged an exit fee. There is then the possibility of a loss of income or growth if markets should rise while your transfer is being processed.

Cancellation Risk – This is the risk that if you decide to cancel the investment after it has been purchased you are likely to lose some of your money.

It is important that you read all the related Mariana product literature carefully and in full so that you understand how the product works and can decide whether or not you are prepared to accept the risks and the possible consequences of investing in a particular product, before proceeding with your investment.

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