VCTs and SEIS

joujou

Now that they have been here for a while, does anyone have these?


How have they been performing so far?

How long does it take you to get the tax relief once invested in both?

edit: VCTs spelling

bigadaj

I hold some vct, some last year and some bought a few months ago.

They are higher risk investments, many have performed well over the last few years as holding higher risk assets has often given higher returns.

They obviously need to be held for five years to maintain tax relief and some may be illiquid meaning that realising your capital may not be straightforward even after that time.

You would expect people to be filling isas and making substantial pension contributions before considering them, but the dividends are often attractive and tax free.

I've just recorded them on my tax return and they have offset other tax at the end of the year, but you may be able to get a tax refund more quickly, by contacting Hmrc and reclaiming or getting your tax code amended.

tlr

In general SEIS funds tend to generate profit. Apparently in the early years the performance was quite poor but his has improved. You can ask specific fund managers about their performance, the major ones claim profits. My subjective opinion based on performance I've been quoted is that an average 30% growth over 5 years is a decent and achievable result. This is without taking into the account the tax incentives.
You can see Mercia results (which is SEIS mixed with EIS) on their website under "performance"
I Sep 2016 there was 20% growth on Jan '14 fund and 80% growth on Apr '14 fund.

For SEIS tax relief it takes severeal months for the fund to invest in a company and than around 4 months for the company to spend the money. You should expect to get your SEIS certificates in around 1 year but this is variable.

chucknorris

joujou wrote: »

Now that they have been here for a while, does anyone have these?


How have they been performing so far?

How long does it take you to get the tax relief once invested in both?

edit: VCTs spelling

Each to their own, but I found that I was being tempted too much by the tax concessions, so I was compromising on what I really wanted to invest in (tail wagging the dog), that combined with the higher fees, I decided that they were not for me. Every now and then I get tempted, but I stop myself just in time.

bowlhead99

joujou wrote: »

Now that they have been here for a while, does anyone have these?

VCTs have been running for over twenty years. Originally the tax relief was only basic rate but they had CGT deferral like EIS does now. When that was dropped the income tax relief rate went up to 40% for a while before coming back down to current levels. There have been a few changes over the years but I've had several at different times.

How have they been performing so far?

I haven't done any EIS although you can look up the numbers for several management groups who have offered them. But for VCT, generally well when you include the tax relief.

In the last 10-15 years, the venture capital and seed capital end of the private equity industry hasn't had the same level of returns as other parts (e.g. mid-market buyouts) but there are a lot of VCT investors that have done well, as the income tax relief does generally make up for the risk taken and the drag from unused cash in the portfolio, assuming you are not going to put your eggs in one basket.

If you only buy one fund and one year and just leave it for a decade you could easily have a bad result. If you diversify yourself by manager and vintage year, returns across the industry have been decent. That is, including the income tax relief, and on the assumption that you would be paying high rate tax on your income and gains if you didn't use VCT because you're a high rate taxpayer who has already used up ISAs and a fair chunk of pensions.

I remember getting a particularly decent result on a fund back in 2002/3 when you only had to hold 3 years to keep the tax relief, which had been my original plan but I ended up keeping it a couple of extra years and getting out just before the financial crisis took hold. Can't remember the exact numbers though. Of course, we are at a different part of the economic cycle now. Also it's important to recognise that some of the investment types which historically formed a decent part of some manager's returns (e.g. management buyouts), are no longer allowable.

Last March I invested the minimum subscription in two VCTs and will probably do just one or maybe two at the most at close to the minimum amounts this year too, so perhaps £5-8k gross at most. In less uncertain times I would do more, but the threshold of Brexit does not do wonders for my confidence in investing in UK-based newly-established businesses.

Obviously the exact amount that other people are investing or making in returns are not relevant to how much *you* should invest or which particular fund you should invest in, as we all have our own personal circumstances.

How long does it take you to get the tax relief once invested in both?

As an example, last tax year I invested in the last week of March; by the time I got around to doing my tax return it was late April and so I got my overall refund (including tax relief owed on my pension contributions and charitable donations etc) in early May.

I could have probably done my tax return right at the start of April and got the refund within two to three weeks depending on how busy HMRC are. If instead you're in a position where you owe tax so have no intention of doing your 2016/17 tax return until as late as possible to avoid penalties (31 January 2018), you would obviously have longer to wait.

hoc

chucknorris wrote: »

Each to their own, but I found that I was being tempted too much by the tax concessions, so I was compromising on what I really wanted to invest in (tail wagging the dog), that combined with the higher fees, I decided that they were not for me. Every now and then I get tempted, but I stop myself just in time.

I agree fully

Peter___4

joujou wrote: »

Now that they have been here for a while, does anyone have these?


How have they been performing so far?

How long does it take you to get the tax relief once invested in both?

edit: VCTs spelling

To get some exact numbers, innvotec published performance of their SEIS funds on their website where they list available funds
​"Innvotec SEIS Funds Overall Performance January 2017"
worldspanmedia.s3.amazonaws.com/media/innvotec/uploads/documents/funds/innvotec-seis-funds-overall-performance-jan-2017.pdf
2014 SFC SEIS is +61%, 2015 +6%, OION 2015 +29%

Symvan Capital will send you performance of companies they have invested in with % uplift on request.