EIS/SEIS

The nature of the Deepbridge investment philosophy is one of hands-on, engaged mentoring to selected investee companies, whilst giving our investors access to dynamic and innovative young companies in a range of high-growth industries. We build partnerships with entrepreneurial management teams growing their businesses and with investors seeking potentially attractive, tax-efficient returns on investment. 

We invest in companies with visible revenues, long-term contracts and high-quality partners. We actively manage the investee companies, through board representation and close working relationships. 

The Enterprise Investment Scheme propositions offered by Deepbridge are discretionary managed portfolios of tax-efficient investments. We pre-clear the EIS qualifying status with HMRC for each investee company before we invest. Our investment decisions are influenced by the commercial merits of each transaction and therefore are not based just on the considerable tax benefits that EIS offer.

The Enterprise Investment Scheme (EIS) is a government initiative designed to attract investment into small UK companies.  EIS investments provide enterprise capital to small unlisted companies that might otherwise struggle to attract funding.  The Government recognises the important role smaller businesses play in a successful economy and offers tax benefits to EIS investors in order to ensure funding is available. 

Since their introduction in 1994, EIS investments have grown in popularity with subsequent increases in limit levels ensuring investment volumes continue to rise year on year.  According to figures provided by HM Revenue & Customs (HMRC), more than £14.2bllion* has been invested through EIS to date (up to the end of the 2014/15 tax year) with more than £1.8billion of this invested in 2014/2015.

 

BENEFITS OF A DEEPBRIDGE (S)EIS

The 100% Rule

The Deepbridge (S)EIS propositions is an investor fee-free (S)EIS opportunity. Investors are therefore not charged any fees at point of investment. Upfront and ongoing fees are paid by the investee companies: this advantage allows investors to enjoy 100% of (S)EIS tax benefits and to have 100% of their investment actually put to work earning investment returns.

Hands-on Management

Deeprbidge takes a proactive approach to managing undelrying investee companies.  Deepbridge's team of experienced business builders work closely with all investee companies to ensure they are developing as planned and in the best interest of investors.

Growth

Investing in smaller UK businesses has the potential to offer significant long-term growth, if they are successful.  Smaller businesses often have the possibility for quicker growth than larger businesses although they also carry a higher risk of loss and value can be more volatile.  The Deepbridge (S)EIS propositions have been designed by experienced industry experts in order to exploit market opportunities in markets in which our team has extensive knowledge and epxertise, and to maximise growth opportunities.

Diversification

Smaller companies behave and perform in a different manner to larger listed organisations, following different investment cycles.  A Deepbridge (S)EIS can, therefore, bring additional diversification to an investment portfolio.

Alternative Investment

As pension lifetime allowances have reduced, many investors require alternative forms of tax efficient long-term investment, such as a Deepbridge (S)EIS.  Deepbridge always recommends that clients seek advice from the financial adviser to ensure their financial planning is cohesive.

 

EIS TAX INCENTIVES

Investors may become eligible for certain tax benefits available through the EIS depending on the length of time the underlying investments are held for:

  • 30% upfront income tax reliefDeepbridge EIS investors may claim up to 30% income tax relief, provided the qualifying investment is held for at least three years.  Investors can claim up to £300,000 for the current tax year and up to £300,000 against their income tax liability for the previous year, as long as the amount of tax relief claimed is not more than the income tax paid.
  • Tax-free growthIf a Deepbridge EIS investment increases in value, there is no capital gains tax (CGT) to be paid.
  • 100% inheritance tax relief after two yearsAs Deepbridge EIS shares are eligible for business property relief (BPR), there is no inheritance tax payable if held by the investor for at least two years and they are still held at the time of death.  For advice regarding BPR investors should contact their financial or taxation adviser.
  • 100% capital gains tax deferralAny taxable capital gain (from thirty six months before an EIS investment or twelve months after) can be invested in a Deepbridge EIS qualifying company and the CGT will be deferred for the duration that investment is held.  If the investment is still held when the investor dies the deferred tax is eliminated.
  • Loss reliefAlthough it is hoped that shares in the underlying investee companies within a Deepbridge EIS do not fall in value (Deepbridge EISs are designed to generate growth, rather than to maximise loss relief), investments can go down as well as up and investors may not get back the full amount invested.  Losses from individual EIS investments can be mitigated as loss relief is available on each individual holding. So, investors can claim loss relief if shares in one company fall in value, even if the other shares in the investor’s EIS portfolio increase in value.  Investors can set loss relief against CGT or income tax, depending which is the most beneficial for their personal circumstances. 

 

SEIS TAX INCENTIVES

Investors may become eligible for certain tax benefits available through the SEIS depending on the length of time the underlying investments are held for:

  • 50% upfront income tax reliefDeepbridge SEIS investors may claim up to 50% income tax relief, provided the qualifying investment is held for at least three years.  Investors can claim up to £50,000 for the current tax year and up to £50,000 against their income tax liability for the previous year, as long as the amount of tax relief claimed is not more than the income tax paid.
  • Tax-free growthIf a Deepbridge SEIS investment increases in value, there is no capital gains tax (CGT) to be paid.
  • 100% inheritance tax relief after two yearsAs Deepbridge SEIS shares are eligible for business property relief (BPR), there is no inheritance tax payable if held by the investor for at least two years and they are still held at the time of death.  For advice regarding BPR investors should contact their financial or taxation adviser.
  • 50% capital gains tax mitigation Capital gains made that are reinvested in SEIS shares qualify for a 50% exemption from CGT 
  • Loss reliefAlthough it is hoped that shares in the underlying investee companies within a Deepbridge EIS do not fall in value (Deepbridge EISs are designed to generate growth, rather than to maximise loss relief), investments can go down as well as up and investors may not get back the full amount invested.  Losses from individual EIS investments can be mitigated as loss relief is available on each individual holding. So, investors can claim loss relief if shares in one company fall in value, even if the other shares in the investor’s EIS portfolio increase in value.  Investors can set loss relief against CGT or income tax, depending which is the most beneficial for their personal circumstances. 

RISKS

Your money is at risk

As with any investment, the value of shares can go down as well as up and investors may not get back the full amount invested.  Investors should be aware that investment in smaller unlisted companies (including (S)EIS qualifying companies) carries with it a high degree of inherent risk whether or not it is done via a diversified portfolio, regardless of any tax advantages which such an investment might carry and/or regardless of any steps taken to attempt to mitigate that risk. Investment in a Deepbridge (S)EIS proposition should therefore be considered a high risk investment.

Long-term investment(S)EIS shares are often held in unlisted companies, from which investors might only be able to exit via a refinance or company sale.  (S)EIS shares must be held for at least three years in order to qualify for income tax relief.  If shares are sold prior to being held for three years, any claimed income tax relief will have to be repaid. (S)EIS investments should therefore be considered as a medium-term or long-term investment and investors are unlikely to have access to their capital during the investment period.

Tax Rules may change(S)EIS tax reliefs are specific to an individual’s circumstances.  Tax rules may change and companies may not always be (S)EIS-qualifying.  If a qualifying company fails to meet the requirements of (S)EIS legislation, tax reliefs may be withdrawn and investors may have to repay rebated tax.  HMRC may change the rules on (S)EIS tax relief at any point.

* Source: HMRC EIS Statistics, December 2013.

Information on this webpage relates to and is provided by Deepbridge Advisers Limited.

The content of this webpage should not be construed as financial advice. Any decision to invest should be made only on the basis of the relevant documentation for each investment. Past performance is not necessarily a guide to future performance. The value of an investment may go down as well as up and investors may not get back the full amount invested. Investments in small unquoted companies carry an above-average level of risk. These investments are highly illiquid and as such, there may not be a readily available market to sell such an investment. Deepbridge Capital LLP, Deepbridge Advisers Limited and Sapia Partners LLP (together "the Sponsors," or "Sponsor) do not provide specific individual advice on the suitability of investments with regard to a potential investor's individual circumstances, risk tolerance or investment objectives and investors should seek independent financial advice if they are in any doubt whether a product is suitable for them.