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Tax incentives

Taxation and Enterprise Investment Scheme tax incentives – SEIS & EIS

Fastr is raising £2.5m and is expecting to be a qualifying company for Enterprise Investment Scheme (EIS) relief.*

This brings with it some major advantages to investors in the company, including:

  • 30% income tax relief on up to £1 million in each tax year;
  • Capital gains tax deferral of unlimited gains from other sources if the EIS investment is made within 1 year before or 3 years after the date of the disposal which gives rise to the gain;
  • No capital gains tax payable on the disposal of shares in qualifying EIS companies;
  • 100% inheritance tax relief after two years, provided the company has traded through the period and continues to do so;
  • Income tax relief in respect of losses – A loss on any individual qualifying investment within the portfolio can be off set against an investor’s individual income in the tax year of the loss.

Comparing tax-efficient investment options

ISA PENSION VCT EIS SEIS
ANNUAL
CAP
£15,240 £40,000 £200,000 £1m £100,000
LIFETIME
CAP
£1.25m /
£1m
 
INCOME
TAX RELIEF
  30% 30% 50%
LOSS
RELIEF
   
IHT RELIEF Depends    
CGT FREE
GROWTH
         
CGT
DEFERRAL
   
TAX FREE
INCOME
 
TAX FREE
LUMP SUM
25%      

The three schemes usually compliment more conventional saving and investment wrappers such as ISAs and personal pensions.

*Illustrations on relief are available under the Enterprise Investment Scheme included on the next page. Investors should take independent financial advice in relation to EIS eligibility before making an investment.

Tax effect on mainstream investment

If they were to invest the capital gain in a typical mainstream investment and get 5-6% growth for five years, then £1 invested becomes £1.34, but after IHT, that will only be worth 80p. (The example assumes IHT at 40%, and that the IHT allowance has been used up elsewhere)

Relief effect on losses

£1 loss

The reliefs mean that even a total loss only results in a new loss of 39p per £1 invested. The relief is granted against the net cost of investment, not the gross cost, so it is 45% x 70p = 31p relief (assuming this is an additional rate taxpayer).

Relief effect on EIS investment

£1 Initial investment

However, if it was invested in an EIS, the ITR, CGT deferral and IHT relief transform the profile of that £1 invested. The net cost of investment is only 42p, and the entire portfolio value of £1.34 (assuming some growth) can be passed on to beneficiaries as part of the estate. In fact the value of the three reliefs (Income Tax, CGT deferral and IHT relief) adds up to more than the initial £1 investment.

Return based on Fastr financial projections

Based on an investment of £2.5m for 8% equity stake and fastr meeting its financial projections at the end of year 5 the company will have a value of £435m. This equates to 13.9 x return coupled with the 30% ITR at the start will result in £14.20 returned for every £1 invested.

Risk

Important – Please Read Carefully

The information contained in this Financial Snapshot is subject to the full risk warning and disclaimers contained on the Crowdcube website from time to time. It is only intended for Crowdcube members and should not be relied on for investment outside of Crowdcube. The Pitch does not purport to be all-inclusive or necessarily to contain all the information that a prospective investor may desire in investigating the Company, and may be subject to updating, withdrawal, revision or amendment. No representation or warranty, express or implied, is or will be given by Crowdcube, the Company, their advisers or any of their respective directors, shareholders, partners or employees as to the accuracy or completeness of the Pitch or the information or opinions contained therein. Any financial projections given are illustrative only and none of the projections or assumptions should be taken as promises on the part of the Company nor should they be taken as implying any indication, assurance or guarantee that those assumptions are correct or exhaustive.

The Pitch contains forward-looking statements. These statements relate to, amongst other things, the Company’s future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as “believe”, “could”, “envisage”,  “estimate”, “intend”, “may”, “plan”, “will” or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this Pitch are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialises, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those expected, estimated or projected. Given these risks and uncertainties, potential investors should not place any reliance on forward looking statements. These forward-looking statements are made only as at the date of the Pitch. Each recipient of the Pitch must make their own independent assessment of the information provided by the Company and is recommended to seek independent advice on the contents hereof from an authorised person specialising in advising on investments of the kind in question. Neither the Company, Crowdcube nor any of their advisers, nor their respective directors, partners, representatives, agents, consultants or employees shall be liable for any direct, indirect or consequential loss or

damage suffered by any person relying on statements or omissions from the Pitch and to the maximum extent permitted by law, all conditions, warranties and other terms which might be implied by statute, common law or the law of equity and any such liability are expressly excluded. The Pitch should not be construed as a recommendation to prospective investors by the Company or Crowdcube or any of their respective officers to invest in the Company, and does not form any commitment by the Company to proceed with an investment. The Company and Crowdcube reserve the right to terminate the procedure at any time and to terminate any discussions and negotiations with any prospective investors at any time and without giving any reason. Any and all discussions, negotiations and communications, including through any online forums, between any recipient of the Pitch and the Company and their respective directors, shareholders, employees, advisers and/or representatives will remain subject to contract. Any person who invests in the Company at any time must comply with all applicable laws and regulations in force in any jurisdiction in which they acquire, offer or sell shares and must obtain any consent, approval or permission required in respect of any such transaction under the laws and regulations in force in any jurisdiction to which they are subject or in which any such transaction takes place or in which they possess the Pitch. Neither the Company, Crowdcube nor any of their respective directors, partners, representatives, agents, consultants or employees shall have any responsibility for any such matters. The distribution of the Pitch in certain jurisdictions other than the United Kingdom may be restricted by law and therefore persons accessing the Pitch into whose possession the Pitch documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of securities laws of any such jurisdiction. Recipients represent and warrant to the Company and Crowdcube that they are able to receive the Pitch without contravention of applicable legal or regulatory restrictions in the jurisdiction in which they reside, conduct business or receive the Pitch, including in particular the requirements of the Act. The Company accepts responsibility for the information contained in this Pitch. To the best of the knowledge and belief of the Company (who has taken all reasonable care to ensure that such is the case) the information contained in this Pitch is in accordance with the facts and there are no other facts the omission of which would affect the validity of such information.

The information contained in the Updates section and the Q&A section does not form part of the Pitch and has not been reviewed or approved by Crowdcube. The content of the Updates and Q&A sections of the pitch are not approved by Crowdcube, but are exempted on the basis that they are follow up communications available to certified high net worth individuals or self-certifi ed sophisticated investors accordance with Articles 48 and 50A of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. Similarly, any information published outside of the Crowdcube platform, including on social media platforms (e.g. Facebook, Twitter) or the Company’s website, does not form part of the Pitch. Crowdcube assumes no responsibility for information contained in the Q&A or Updates section, or in any form of media outside the Crowdcube platform.

 

RISK WARNING

Potential investors should be aware of the risks associated with an investment in the Company especially at an early stage in its development and should ensure that they have read and understood the Risk Warning on the Crowdcube website before continuing. If any potential investors are in any doubt regarding the contents of any Pitch, they must consult their own professional fi nancial advisers.
Investment in the Company carries substantial risk and may involve special risks that could lead to a loss of all or a substantial amount of such investment. Unless prospective applicants for shares fully understand and accept the nature of the Company and the potential risks inherent in the Company they should not invest in the Company. A prospective investor should consider carefully whether an investment in the Company is suitable for themselves in the light of their personal circumstances, the economic climate and the fi nancial resources available to them. There can be no assurance that the Company’s objectives in respect to any of its funds will be achieved and investment results may vary substantially over time. As such, an investor’s capital may be at risk.

ANY INVESTMENT IN PRIVATE LIMITED COMPANIES, ESPECIALLY AT AN EARLY STAGE IN THEIR DEVELOPMENT, IS AN INHERENTLY RISKY INVESTMENT. IF YOU ARE IN ANY DOUBT ABOUT INVESTING, CROWDCUBE RECOMMENDS YOU CONSULT WITH YOUR FINANCIAL ADVISERS.