E.I.S. - Reward versus Risk

Balancing risk against rewardReward & Risk have always been inextricably linked. Your personal investment portfolio should be balanced; a portion for security but also allowing for growth & income. Enterprise Investment Scheme shares have a head start in growth & income because of their unique tax advantages; you can reclaim tax that is, otherwise, lost to you forever.  30% Income Tax relief... Unlimited C.G. Tax deferral... Exemption from Inheritance Tax after just two years... and loss relief to set off against future tax (if required). 

But what about risk?

All EIS shares are characterised as suitable for wealthy & adventurous individuals who can afford to take a high level of risk and lock money away for the long term.

Investors should carefully select their EIS company on many criteria, not just the tax benefits which accrue to all HMRC approved Enterprise Investment Schemes. Of paramount importance will be selling on your shares in a way allowed by EIS rules.

Best advice is always to undertake due diligence. Return on Investment has to be balanced against the strengths and weaknesses of any shareholding opportunity.

Remember to assess potential profit rather than just past performance. Be aware of significant changes in buyer behaviour like the near-universal adoption of on-line trading in preference to mail order. Internet selling levels the playing field, allowing small, knowledgeable companies to compete against moribund multi-national rivals.

Depending on the value of funds being subscribed, expected RoI and an investors attitude to risk, appropriate questions need to be asked. Prime considerations are;

  • How long has the business been actively operating?
  • In what marketplace does the company trade? Is it a safe or risky one?
  • Is that market sector new or long established? (cutting edge versus stable)
  • How long has the current Management team been employed in the business? 
  • Are the employees shareholders and do they actively buy shares?
  • Does the company have a unique competitive advantage? 
  • Is their competitiveness likely to endure for at least 3 years?
  • Earning potential should be assessed...although dividends will be taxed!
  • Dividends need balancing against growth in share value...free of CGT.
  • Is there a strategy to create a market for trading maturing EIS shares? 
No amount of tax 'sweetener' can turn a bad investment into a good one...only lessen the bitterness when it turns sour. Avoid having your tax relief withdrawn. Choose a company that understands and complies with complex E.I.S. regulations. Whilst there can be no pre-arranged agreement for realising mature EIS shares, it will be some consolation to know that Office Europe Ltd has a viable investor exit strategy.

Accolade Office - Enterprise Investment Scheme opens to investors - 2016

Phone 0141 774 4600 to check availability of this 30% tax saving EIS

An Enterprise Investment Scheme is by far the best way of exploiting tax breaks

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EIS relief takes the edge off your tax bill

Inaccessible Pinnacle 
Sgurr Dearg 
Isle of Skye 

Photo taken by Bill Gray, 
Manager @ Office Europe
Sunday May 1st 2011

"He either fears his fate too much,
Or his deserts are small,
That puts it not unto the touch, 
To win or lose it all."

Extract from 'My Dear and Only Love' written in 1643 by James Graham, Marquis of Montrose. 

Original text & images are Copyright to Accolade - Office (europe) Limited © 2016
Original images have been pixellated with a pattern that makes them identifiable as the unique copyright property of Accolade Office- europe Ltd. © applicable within all legal jurisdictions, worldwide.

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An Enterprise Investment Scheme is an appropriate venture for UK income tax payers who can self-certify being a sophisticated investor.
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