Switched On Investors Go For Last-Minute Tax Breaks

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Written By Mahmoud Sarvari

Switched On Investors Go For Last-Minute Tax BreaksSwitched on fund managers are looking for investors to stake money for energy projects before the government turns off tax breaks in April.

Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) fund managers are warning anyone investing in energy generation projects, such as hydroelectricity, wind and solar power will miss out if they do not act before the April 5 deadline.

Chancellor George Osborne warned the tax breaks would go in his Autumn Statement because he believes the projects already receive subsidies for selling energy that takes away the risk SEIS and EIS are designed to temper.

One fund offering energy based investments the Octopus EIS, which is funding an anaerobic power project.

Spokesman Matt Setchell said: “Energy is a rapidly growing sector that has proved popular with many EIS investors.”

Octopus is seeking to raise £20 million for the EIS before the deadline.

Hybrid SEIS

Mercia Fund Management has opened a EIS-SEIS hybrid fund for technology investment.

The minimum stake is £25,000, split 75% between the EIS and 25% to the SEIS.

Annual growth is predicted as between 10% and 50% without taking into account the tax advantages of investing in either of the schemes.

The money will go into life sciences, electronics and hardware firms.

Mercia managing director Mark Payton said: ‘Technology is probably the fastest growing sector in the UK and offers investors a lot of opportunities.”

EIS v annuities

Financial advisers are looking to point clients with cash to invest for higher returns towards EIS and SEIS after flexible access pension rules come in on April 6.

Many advisers suggest the returns and income prospects from EIS in particular offer better returns than traditional pension annuities.

Financial advisers also suggest EIS can offer retirement savers extra tax relief if they switch money out of their pensions.

For instance, money staked in EIS shares attracts a 30% income tax reduction for the investor, which could go some way to offsetting the tax paid on releasing the investment cash from a pension.

Meanwhile, the investment grows tax-free providing the investor and company keep to EIS rules for three years.

Flexible access allows a pension saver to take the first 25% of a lump sum tax free. They then pay income tax on the balance.