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Post by solicitorious on Feb 18, 2015 21:58:55 GMT
Usual caveats about me not being a tax expert apply, but I did spend a lot of time getting to grips with SEIS and EIS for the tax form I most recently completed around Christmas time and I can even remember some of it! I'm not referring to my notes here, so some of this may be slightly off, but the gist is right. The HMRC scribbles about this are very helpful actually: www.gov.uk/government/publications/the-enterprise-investment-scheme-introduction/enterprise-investment-scheme and I'd advise reading them because what I'm saying is applicable to my circumstances and might not be to other peoples'. Any CGT owing for the year in which the investment was made can be fully or partially wiped out by 50% of the value of your EIS qualifying investment. It can be carried back to the previous year's tax in order to deal with any CGT already paid for that year instead. You have to declare your investment and make a claim for the income tax reduction EVEN IF YOU DON'T HAVE TO PAY ANY INCOME TAX and therefore won't benefit from it. This is because, only if you've made that claim will you go on to benefit from not having to pay CGT on any gains you make in the future from the investment. There is a mimumum term you have to keep the investment, which I think is 3 years, but I may have misremembered that - Christmas was ages ago, and I've got it written down, so why would I remember?  Edit: I see someone has confirmed it as 3 years above. Further EDIT: I also had it confirmed by someone in the tax office that if you carry back your claim to the previous tax year, then it is treated as having been made in that tax year. My understanding of that is that it would thus reduce the time you have to hold it by up to a year, but I've not had to put that to the test, and it's not a likely issue in most cases I'd have thought - most EIS investments don't instigate their exit strategies until the requisite time period is up for that very reason. Obviously there'll be unusual circumstances here and there and if they apply, then you'll have to look into it. I should start by saying that I have zero previous expertise. However we are motivated to learn about SEIS/EIS because we are going to realise a capital gain in 2015/6 which will comfortably exceed our allowances. I think Rose that, in amongst what you have said above, you have described Reinvestment Relief which is an SEIS benefit and failed to mention Deferral Relief which an EIS benefit. Both SEIS and EIS also have Disposal Relief. I believe (but would like to be corrected if wrong) that these CGT benefits are in addition to the Income Tax offsetting which others have described. In particular, for this AC EIS investment, it seems to me that if a 40% taxpayer can use all available reliefs then the downside on a total loss could be 14% of the EIS investment, because we would be deferring the capital gain (at 28% in 2015/16) to a future year where it can be set against that year's allowance. Again, would like to be corrected if I am wrong. Edit to link to the companion document to the one that Rose has provided www.gov.uk/government/publications/seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-hs393-self-assessment-helpsheetI think you are wrong about deferral relief. If you have a cgt liability you can defer it by investing it in EIS. However when you sell your EIS shares, you will have to pay the cgt you have deferred. You cannot utilize your cgt allowance again! However, you can defer it indefinitely! Clue: there is no cgt payable on assets held at death... EIS shares are also exempt from IHT after 2 years.
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bugs4me
Member of DD Central
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Post by bugs4me on Feb 18, 2015 22:30:15 GMT
@ mikes1531Losses [less initial income tax relief] are offsettable against income tax, as well as cgt. Yes you have to hold them for at least 3 years. Your losses would be limited to 56% as a basic rate taxpayer, or 42% as a 40% taxpayer, assuming of course you have sufficient tax liability to utilize. Worked example: You invest £1000 You get £300 pounds tax relief against your current years tax bill (or the previous, or split between the two in whatever proportion you wish). We have been told categorically now that share certificates will be issued post April 6 2015, so the years you have to play with are 2015/16 and 2014/15. Obviously you need at least £300 of tax liability to make use of the relief. Worst case scenario. You hold them for 3 years and they are valueless. Worth £0. In that tax year you can offset the loss (less initial relief) against your income. Loss = £1000, less the initial £300 relief is £700. This £700 loss can be offset against taxable income, giving a benefit of £700*20% = £140 for a basic rate payer, or £700*40% = £280 for a higher rate payer. Again you would obviously need to have £700 of taxable income to benefit fully. So for a basic rate payer the total loss of the investment has been mitigated by £300+£140=£440, leaving a 56% loss, and for a higher rate payer by £300+£280=£580, leaving a 42% loss on the initial £1000 investment. [Disclaimer: I am not an accountant. DYOR] - thank you for the example - I'm sure my accountant will be far more up to speed on this than myself. Nonetheless, I await those financials from AC before making any sort of commitment even if it is on a pre-bid basis which can later be withdrawn. I am familiar with projections but that's all they are - maybe I've been watching too much Dragons Den on TV. More important is how are they going to achieve them. Whilst I have no doubt that AC is a sound business - otherwise I wouldn't invest with them, it has been a bit hit and miss on the BL's plus a couple of others for example. The BL's I feel were just a too optimistic time-scale reference the 6 months and I'm sure that lessons have been learnt. In the meantime though others have entered the BL market so that seems to be a diminishing area for AC to name just one sector. So at this stage the ball is in the AC court to produce those financials IMO and if they can raise the funds without producing them then all credit to them.
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Post by stuartassetzcapital on Feb 18, 2015 22:36:10 GMT
There is a post higher up indicating that if you join via the link fees are halved for us, (this wasn't made clear on the email alas so I don't think I used it).
Looking at the seedr web site I have a suspicion this is being achieved by AC getting the referral credit and having chosen to pass it back to us. Perhaps stuartassetzcapital could confirm if I am correct and that all the benefit is being passed back to us. If that is the case perhaps the normal rule on referral links (which I agree with) might be relaxed.
My understanding, after an email exchange with Mark Wardrop, is that it doesn't matter how you join (you may already belong), but to benefit you should use the referral link when you invest. I agree that the whole thing could be a lot clearer, please. Hi, starting to work though outstanding questions. The referral link halves the fee we pay for a given investor, fair as the investor would be someone we told about the campaign. We don't get any fee back as suggested even though it says 'promocode' in the link- that just tells the website which campaign it is and that the discount to fee is valid.
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Post by stuartassetzcapital on Feb 18, 2015 22:38:40 GMT
Does anyone understand the Q&A exchange regarding the £5m HMRC limit on an equity raise for EIS eligibility ? Part of the answer given by seedrs staff is "The £5m limit is with respect to how much can be raised pursuant to the EIS eligible round. Any institutional capital would not be EIS eligible in any event. " Considering seedrs is about raising money from the crowd, the clarity of the processes involved are very poor. If I knew for sure this raise was to be EIS eligible I might be tempted, but given the amateurish way this whole exercise is being undertaken I'll probably restrict any investment to a token few pounds as a learning exercise. The £5m is the maximum that can be raised in a year and actually receive EIS tax relief on. If you raise for example £7m in a year and issue £5m of certificates that's also fine I understand.
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Post by stuartassetzcapital on Feb 18, 2015 22:40:51 GMT
I'm no so concerned about the £5m limit being breached. The institutions in the series A won't require EIS eligible shares and the series B funding was never likely to be EIS eligible. So it's really only the £2m of converts plus an additional private investors that come in. I worry more about the EIS excluded activities which include "financial activities such as banking, insurance, money-lending, debt-factoring, hire-purchase financing or any other financial activities." I wonder how Assetz, now that it is FCA regulated, is avoiding being considered as pursuing these activities. It may be able to be argue that it only offers a intermediation platform (it doesn't actually lend money). The Seedrs Q&A implies that they have not yet received EIS Advanced Assurance. Correct re the £5m I understand. The excluded activities are confusing yes. We are not a principal lender but an agent. Issue neutralised. We already have an EIS approval from seed funding and that was dated December 2014 that relates to 2013 funding so we are just reapplying for that again now.
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Post by stuartassetzcapital on Feb 18, 2015 22:44:18 GMT
I notice the largest investor so far, and possibly the first, weighed in with £509k anonymously and is based in Stockport. Excuse my naivety, if this question is inappropriate, but is there anyone on the AC team who needs to make some sort of disclosure? Hi, no its an investor of ours who likes us and sees the future clearly.
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Post by stuartassetzcapital on Feb 18, 2015 22:47:52 GMT
No, it's not a loan reeknralf. You are buying equity, but it won't be valued, and your money actually turned into shares, until some point in the future. Until then it's like a loan, but with no interest. When that point arrives (most likely later this year, but any time up to 2 years) your shares will cost 10% less (rising to max 20% depending on how long it actually takes) than those that are purchased by others at that point. The problem for everybody considering the investment is that we don't know what the valuation will be - that is the unknown, and what we must each make a judgement on. Edit: because the shares are not quoted on a stock exchange, you have to keep them until such time as somebody offers to purchase them from you, via a future IPO or whatever the exit method is. If you find somebody to purchase them from you, you are able to sell them, but you have to agree the purchase price between you. This is the case for all unquoted shares. You buy them if you believe the company is going to do well enough that when you come to sell them they will be worth more than you invested. It's not for anybody needing an 'out' as others have said before. I wouldn't call my self an "Angel" just yet but I have invested in several early stage start ups as well as running my own company (which is of a similar stage and size to AC). The "in your face" nature of the bottom right hand corder advert for the fund raise combined with the lack of transparency of the deal is too much for me. AC are pretty good about setting out the T&Cs in a place you can find them - not so with Seedrs (I'm registered and still didn't find them). I trust your summary, if the maximum upside is 20% and poot liquidity, why should I move money out of AC where I have a decent return, reasonable LTV and very good liquidity. If wanted the chance of 20% in a year or two I'd still be in the FTSE, but the near guarantee of 10% a year with AC is too good to miss out on,, plus I understand AC now and Seedrs just haven't presented all the info I need in time. Hi Tony, we certainly aren't expecting a valuation growth over 2 years of just 20%, thats just the discount to a future investment valuation (but limited to the cap) but we are in negotiations over that next investment right now and it should be well before even one year at which point the Seedrs investors roll up with that. With growth rates of hundreds of % pa in revenues for the next few years forecast the value should grow much faster than that.
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Post by stuartassetzcapital on Feb 18, 2015 22:56:36 GMT
I know that salesmen can be "economical" with the truth but come on............................. It's making me have second thoughts about AC in general just with that one answer. I have a similar issue with that same answer to the Seedrs question about defaulted loans, where stuartassetzcapital mentioned just four "'hard defaults’ where the situation is serious enough to warrant intervention. ... We have had only 4 cases where Assetz Capital has had to enact a collections procedure. They are:"- A contracting business owing £104,000 where payments due under a contract in the next 6 months are protected by a charge on that contract and lenders will be repaid in full.
- A furniture retailer who borrowed £700,000.
- A property loan for £1.9m where a sale of the property has not happened and the borrower has not been co-operative. The LTV is below 70% and a sale of the property will result in full repayment of capital and interest for our lenders.
- Our most recent default was a business that borrowed £780,000 lost a major contract and cash flow has been squeezed.
IMHO, the most significant omission is the £1.96M loan that's tied to the third loan listed above. There are a number of other cases where the situation is serious enough that AC have suspended Aftermarket sales, and have asked lenders to vote whether to appoint receivers. I haven't looked at those in detail, but ISTM that in some of those the appointment of a receiver is imminent even if it hasn't happened quite yet. And even where lenders have voted to give the borrower a bit more time to correct the situation, I would have thought those 'non-performing' loans were deserving of more mention in response to the question than they received.
Hi Mike, the one you refer to has first charge solid bricks and mortar on a modest LTV. that's what people like about lending through us, we usually have something very solid to go after if necessary. They are also earning 18% pa penalty interest which is why you don't hear many complaints. We have a bit of a hairtrigger on issues and lock down sales whilst we establish what is happening for the benefit of lenders. To date only one loan has a risk of actual loss and that is only because it is new and still being assessed. We had other like that and they no longer have expected losses or have been fully recovered. Not bad after nearly two years and a few situations requiring detailed management.
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Post by stuartassetzcapital on Feb 18, 2015 22:58:17 GMT
Aaaaah, Did anyone read the latest Q&A feedback regarding payment deadlines ? Having scanned the terms and conditions, the only thing I could find was reference to a 2 week window, post signalling your intent to invest ( by clicking the invest button and assigning an mount), before loosing your investment if you had not deposited and payed up in full. I believe it said something like "payments can take 10 days to clear so be sure to deposit funds and 'pay' within 48Hrs of clicking invest to avoid loosing your investment" . So fearful of loosing out I coughed up the cash immediatey and now they say : "As soon as the campaign hits 100%, the due date for payment will be 7 days from that date".
Great... I could have been earning interest on that lump sum for a few weeks minimum  . That could have been made A LOT clearer on the Seedrs website. Or did I miss something obvious here ? We have some larger investors progressing forwards so the campaign could close at any time - judgement call I guess.
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Post by stuartassetzcapital on Feb 18, 2015 23:00:51 GMT
I understand that in order to see the AC business plan and financial projections I have to make a request for that directly to Assetz using the link near the top of the Seedrs Q&A page. I did that yesterday (Tues). This morning (Wed), I received a reply from Stuart Law asking for my contact details so they could send me their NDA. (Why Seedrs didn't supply the necessary details to Assetz is beyond me.) Anyway, at noon today I sent the requested details. I've had no response from Assetz since. So I don't yet have the NDA, much less the info I requested. Has anyone else tried to obtain this info? If so, were you more successful than I have been? stuartassetzcapital: Can I make this request directly to you or AC? Or do I have to do it through Seedrs? Hi Anyone requesting business plans and financials through the Seedrs Q&A and verified by us will receive it although it is redacted somewhat so lots of baby Assetz's don't suddenly appear ! Just contact Mark Wordrop otherwise and it should be out tomorrow.
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Post by solicitorious on Feb 18, 2015 23:03:16 GMT
@ mikes1531Losses [less initial income tax relief] are offsettable against income tax, as well as cgt. Yes you have to hold them for at least 3 years. Your losses would be limited to 56% as a basic rate taxpayer, or 42% as a 40% taxpayer, assuming of course you have sufficient tax liability to utilize. Worked example: You invest £1000 You get £300 pounds tax relief against your current years tax bill (or the previous, or split between the two in whatever proportion you wish). We have been told categorically now that share certificates will be issued post April 6 2015, so the years you have to play with are 2015/16 and 2014/15. Obviously you need at least £300 of tax liability to make use of the relief. Worst case scenario. You hold them for 3 years and they are valueless. Worth £0. In that tax year you can offset the loss (less initial relief) against your income. Loss = £1000, less the initial £300 relief is £700. This £700 loss can be offset against taxable income, giving a benefit of £700*20% = £140 for a basic rate payer, or £700*40% = £280 for a higher rate payer. Again you would obviously need to have £700 of taxable income to benefit fully. So for a basic rate payer the total loss of the investment has been mitigated by £300+£140=£440, leaving a 56% loss, and for a higher rate payer by £300+£280=£580, leaving a 42% loss on the initial £1000 investment. [Disclaimer: I am not an accountant. DYOR] Well explained. For a short video confirmation try www.investing-works.com/Another way of looking at it is. If the £1000 investment doesn't go anywhere in 4 years, and is still worth £1000, you have still earned a nice tax free 9.3% compounded per annum! [or 15.5% before tax for a 40% tax payer] This is because your £1000 investment is only costing you £700 [the HMRC are paying the other £300].
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Post by Come_on_Grandad on Feb 18, 2015 23:20:42 GMT
I should start by saying that I have zero previous expertise. However we are motivated to learn about SEIS/EIS because we are going to realise a capital gain in 2015/6 which will comfortably exceed our allowances. I think Rose that, in amongst what you have said above, you have described Reinvestment Relief which is an SEIS benefit and failed to mention Deferral Relief which an EIS benefit. Both SEIS and EIS also have Disposal Relief. I believe (but would like to be corrected if wrong) that these CGT benefits are in addition to the Income Tax offsetting which others have described. In particular, for this AC EIS investment, it seems to me that if a 40% taxpayer can use all available reliefs then the downside on a total loss could be 14% of the EIS investment, because we would be deferring the capital gain (at 28% in 2015/16) to a future year where it can be set against that year's allowance. Again, would like to be corrected if I am wrong. Edit to link to the companion document to the one that Rose has provided www.gov.uk/government/publications/seed-enterprise-investment-scheme-income-tax-and-capital-gains-tax-reliefs-hs393-self-assessment-helpsheetI think you are wrong about deferral relief. If you have a cgt liability you can defer it by investing it in EIS. However when you sell your EIS shares, you will have to pay the cgt you have deferred. You cannot utilize your cgt allowance again! However, you can defer it indefinitely! Clue: there is no cgt payable on assets held at death... EIS shares are also exempt from IHT after 2 years. I'm looking at www.gov.uk/government/publications/enterprise-investment-scheme-and-capital-gains-tax-hs297-self-assessment-helpsheet and half way down page 6 is the paragraph on "How do you report the revived gain?". There follows reporting instructions, including a reference which I do not think is relevant and then what seems to me to be a straightforward sentence "You can deduct the annual exempt amount for the tax year in which the deferred gain is revived to cover the whole or part of that deferred gain."
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Post by solicitorious on Feb 18, 2015 23:49:07 GMT
I think you are wrong about deferral relief. If you have a cgt liability you can defer it by investing it in EIS. However when you sell your EIS shares, you will have to pay the cgt you have deferred. You cannot utilize your cgt allowance again! However, you can defer it indefinitely! Clue: there is no cgt payable on assets held at death... EIS shares are also exempt from IHT after 2 years. I'm looking at www.gov.uk/government/publications/enterprise-investment-scheme-and-capital-gains-tax-hs297-self-assessment-helpsheet and half way down page 6 is the paragraph on "How do you report the revived gain?". There follows reporting instructions, including a reference which I do not think is relevant and then what seems to me to be a straightforward sentence "You can deduct the annual exempt amount for the tax year in which the deferred gain is revived to cover the whole or part of that deferred gain." It looks as though you are right. See example 5 in your document, in conjunction with your quoted text. Thanks for the correction. The tax breaks on EIS are phenomenal!
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Post by stuartassetzcapital on Feb 18, 2015 23:58:59 GMT
I have a very positive view on the potential for growth of AC and its current position in the P2P lending. However, I believe we should all be careful that this convertible offer does not become a bit of a blank cheque. I did some search on duedil and I now understand AC already uses a number of different classes of shares (A to H) for a range of different reasons. Different classes of shares come with quite different rights to vote and to participate to profit/losses generated by the company and its subsidiaries. I would welcome some clarification on two simple points from AC or anyone who has a clue: 1) Which of the A-H shares will be issued for this convertible at the date of conversion? 2) The forthcoming institutional equity raise will target the same class of shares as the present convertible? Sorry if I'm increasing confusion, but I feel this point might be relevant. Hi Max, the various share classes are for the various management teams and divisions but all merge to one on a float etc. What matters is that we are issuing new ordinary shares with full voting and dividend rights and that the new institutional investors will also have these O shares so yes to your second question.
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Post by stuartassetzcapital on Feb 19, 2015 0:00:55 GMT
Does this mean that AC didn't anticipate that potential investors might like to see their business plan and financial projections before investing? If they had, they'd have prepared the NDA before the Seedrs campaign started. I am not impressed!  I'll let you know when my NDA drops in. I'm surprised that Seedrs or maybe AC would expect any investment prior to people having sight of these financial documents. Certainly no loan on the AC platform would take off without this information - surely this is no different. Hi, its not normal apparently to issue on the crowdfunding platforms but we can issue separately and should be doing tomorrow.
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Edit: I see someone has confirmed it as 3 years above.
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