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investor’s portfolio and a growing number of IFAs and wealth managers are including SEIS funds in their recommendations to clients. A survey by the EIS Association found that 14% of advisers already recommended SEIS investments and 61% of all advisers expected their use of SEIS (and EIS) to increase over the next year. Tax advantages for investors Often it is the tax reliefs that first catch the eye for potential SEIS investors - reliefs that reduce risks and increase return on investment. Within some criteria, a company can raise £150,000 in funding covered by SEIS reliefs. An individual investor can make multiple SEIS investments up to £100,000 per annum, qualifying for: • 50% income tax relief: claimed back through selfassessment in the tax year following the investment or ‘carried back’ and claimed immediately against the previous tax year • 100% capital gains exemption: gains upon exit, after a three year qualifying period, are tax free • 50% capital gain re-investment relief: capital gains may be reinvested in SEIS to achieve re-investment relief, restricted to half of the gains realised • loss relief: should a company fail the net investment (total minus the income tax relief) is multiplied by your tax rate and reclaimed from income tax • 100% inheritance tax relief: provided that investments are held at the time of death and have been held for two years For an investor with capital gains and a higher rate income tax liability, the total available reliefs can cover 84% of the investment - only 16% of their investment is at risk HMRC publishes comprehensive guides to the rules around SEIS on its website. Healthy returns Reliefs should not be a reason to invest or to recommend an investment. A much more compelling rationale are the potential returns that are available. A recent report illustrated the returns from seed investing showing that while it may be high risk, a portfolio can still deliver healthy returns. The Enterprise Research Centre (ERC), in conjunction with the UK Business Angels Association, published A Nation of Angels, in January 2015 - research completed through direct interviews with 403 business angels and 28 angel syndicates representing 8,000 angels. It found: • 45% of angels reported that their investee businesses showed ‘high growth’ while 64% had investments showing ‘reasonable growth’. • 60% of angels reported that they have experienced a positive (full or partial) exit since their first investment. • 79% of them said they would re-invest their gains in further small business investment opportunities – only 7% said they would not. It found that angels reported a lower rate of low returns and a higher rate of expected higher returns than in previous research – showing confidence in the market and the performance of their seed investments. When asked about the growth status of their current portfolio, angels reported that 19% of their investee businesses showed ‘high growth’ while 34% of their investments showed ‘reasonable growth’. (The authors of the study did not define ‘high growth’ and ‘reasonable growth’ but left them subjective.) When asked about their expectations of their returns from their portfolio of investments made since January 2012, investors expected that 76% of their investments would yield a positive return, of which 19% of their investments would yield a six to 10 times return and 13% of their investments would yield more than 10 times return. Real growth stories When have you ever heard someone discussing their pension at a dinner party? Or explaining their ISA to their grandkids? While many investment products can struggle to capture the imagination, investing in early stage businesses creates pride and a rich source of stories. Following a business as it grows (the triumphs and disasters) is part of the joy for investors. It is also a valuable way for advisers to stay genuinely engaged with their clients. 30 EIS Yearbook 2016/17
Thought Leadership Considerations for reducing risk & increasing returns There are several ways to make SEIS investments, for example as an individual business angel or as a consortium of angels; through crowdfunding or through subscribing to a fund. Useful questions when considering SEIS investments are: • how can I construct a portfolio of several investments across companies and sectors? 60% 60% of angels reported that they have experienced a positive (full or partial) exit since their first investment. • how can I get access to many potential investments then efficiently distil the best choices? • how can the selection criteria increase the proportion of successful businesses and reduce failures? • how realistic are the valuations? • how are the start-ups being helped to reduce risk, accelerate growth and achieve maximum value? At Worth Capital we have been investing in seed stage start-ups well before the advent of SEIS. Our experience in answering these questions has led us to a model which we believe ‘stacks the odds’ of seed investing. We have created the Start-Up Series - a competition format from which every month we distil the brightest of the UKs entrepreneurs with the smartest ideas. Our partners, Amersham Investment Management, are fund managers for the Start-Up Series SEIS Fund One which will invest in the winning businesses. We’d love to explain more and share our passion for seed investing. Please get in touch or visit our website - www.worthcapital.co.uk 79% 79% of them said they would re-invest their gains in further small business investment opportunities – only 7% said they would not. Reliefs should not be a reason to invest or to recommend an investment. A much more compelling rationale are the potential returns that are available 45% 64% 45% of angels reported that their investee businesses showed ‘high growth’ while 64% had investments showing ‘reasonable growth’. EIS Yearbook 2016/17 31
Page 1 and 2: FOR PROFESSIONAL INVESTMENT ADVISER
Page 3 and 4: CONTENTS CHAPTER • 1 Foreword Mar
Page 5 and 6: The Blackfinch Asset Focused EIS Po
Page 7 and 8: LOOKING BEYOND BREXIT Welcome to EI
Page 9 and 10: THOUGHT LEADERSHIP
Page 11 and 12: Thought Leadership The summer of 20
Page 13 and 14: Thought Leadership Let’s not be s
Page 15 and 16: Thought Leadership In fact, much of
Page 17 and 18: Thought Leadership RISK EQUALS REWA
Page 19 and 20: Thought Leadership budget and appet
Page 21 and 22: Thought Leadership to see taxes for
Page 23 and 24: Full service creative agency As spe
Page 25 and 26: Thought Leadership The more you kno
Page 27 and 28: Thought Leadership investing larger
Page 29: Thought Leadership Start-ups are us
Page 33 and 34: Thought Leadership crowdfunding pla
Page 35 and 36: Thought Leadership A valuable addit
Page 37 and 38: INVESTMENT SPOTLIGHT
Page 39 and 40: Investment Spotlight A BIRD’S EYE
Page 41: Investment Spotlight ACTION! UK FIL
Page 44 and 45: Make It Your Business Toil. Hard gr
Page 46 and 47: Helping you support your clients’
Page 49 and 50: Investment Spotlight INVESTING IN T
Page 51 and 52: Investment Spotlight THE INSIDE TRA
Page 53 and 54: Investment Spotlight DISRUPTING THE
Page 55 and 56: Investment Spotlight DIVERSIFICATIO
Page 57 and 58: Investment Spotlight GROWING THROUG
Page 59 and 60: ENHANCED PROFILES
Page 61 and 62: Enhanced Profiles USPs • Reputati
Page 63 and 64: Enhanced Profiles USPs • Over 20
Page 65 and 66: Enhanced Profiles USPs • Two spec
Page 67 and 68: Enhanced Profiles INVESTMENT STRATE
Page 69 and 70: Enhanced Profiles USPs • A ‘com
Page 71 and 72: Enhanced Profiles USPs • Sector e
Page 73 and 74: Enhanced Profiles USPs • Hands-on
Page 75 and 76: Directory ACCELERIS CAPITAL Norman
Page 77 and 78: Directory DAEDALUS PARTNERS LLP Gav
Page 79 and 80: Directory JOULE ASSETS EUROPE Jessi
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Directory SENECA Jack Rose, LGBR Ca
Page 83 and 84:
INFORMATION MEMORANDUM For further
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Open Offers EIS Open December 2015
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Open Offers Open 05/09/2016 Minimum
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Open Offers EIS Open 06/09/2016 Clo
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Open Offers SEIS Open 17/01/2014 Cl
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Open Offers IHT Open October 2014 C
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IFAMAGAZINE.COM EISMAGAZINE.COM FAN
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