First principles of investing
Introduction|
Course|
Q&As |
Recommended reading|
Quiz |
38
12. Tax efficient but may be very risky
All of the investments below carry the ultimate wealth warning: things can go very wrong, and you could lose the lot.
In the case of Enterprise Zone Trusts, you can even end up having to pay out in losses more than the original capital investment.
- Enterprise Investment Schemes aim to make a large capital gain from speculative equity investment in a single, small unquoted company. The investment period is a minimum of five years. The maximum investment is £500,000 a year as of 6th April 2008 (previously £400,000 per year). There may be substantial income tax and capital gains tax breaks.
- Venture Capital Trusts aim to make capital gains from a portfolio of speculative equity investments in smaller unquoted companies. You are required to hold a VCT for a minimum of five years as of 6th April 2006 (previously three years). The maximum investment is £200,000 a year.
- Enterprise Zone Trusts aim to make an equity investment in property, where the purchase cost is subsidised by tax relief. As such this may be attractive to high income tax earners only as an income tax shelter - there is no CGT exemption or roll over provision. There is no annual investment limit.
Films and forestry are also tax efficient but generally only for the wealthy entrepreneur. You may wish to seek expert advice.
In 2008, shipbuilding and coal and steel production were excluded as qualifying activities for EISs and VCTs.
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