03.03.2013  Extracts from an article in Sunday Times 3rd March 2013

A clever use of investment schemes is now more popular than aggressive avoidance.

By Ali Hussan

Britain’s richest individuals are shunning aggressive tax-sheltering schemes and making creative use of simple reliefs to pocket large savings.

KPMG, the accountancy giant, said its high net-worth clients no longer want to take advantage of controversial tax avoidance schemes such as film partnerships, amid fears they may be the target of HM Revenue & Customs (HMRC) investigations.

Ahead of the end of the tax year on April 5, individuals are instead looking for ways to benefit fully from simpler schemes pushed by the government to boost investment in smaller firms and support entrepreneurs.

David Kilshaw at KPMG said: “The appetite for ‘aggressive’ tax planning has diminished to almost zero, to be replaced by a desire to be tax efficient via recognised tax breaks.”

This follows a series of high- pro-file cases where celebrities and corporations have been named and shamed for using complex schemes to avoid tax. The government recently invested £77m in boosting HNIRC’s capacity to tackle tax avoidance and evasion by “wealthy individuals and multinationals”.

Kilshaw added that there are many reliefs and exemptions available, lessening the need for aggressive tax planning. “They offer often unexplored opportunities,” he said.

Get 98% tax relief

Enterprise investment schemes (EIS) are designed to encourage investment in start-up firms. Investors get 30% income tax relief on the amount invested after three years. They are increasingly attractive to wealthy individuals who have already maximised their annual pension contribution of £50,000.

The number of firms seeking EIS approval from HMRC has increased from 1,457 to 2,147 in the past year, according to analysis by Rockpool Investments, an EIS provider.

Rockpool says the tax savings can be significant. Say you made a £100,000 gain on the sale of shares or a buy-to-let property. You would normally have to pay 28%, or £28,000, in capital gains tax (CGT), assuming you had already used up your annual CGT-free allowance of £11,200. If you invested in three or four EIS companies instead, you could defer this payment until the sale of the shares. By putting in £100,000, you would get £30,000 income tax relief as well, for an immediate saving of £58,000.

After two years, EIS companies’ also qualify for “business property relief”, which means they fall out­side the value of your estate for inheritance tax. This is normally payable at 40% on all assets above the tax-free threshold of £325,000 per individual — an effective saving of £40,000 on your estate’s tax liability. The £28,000 CGT bill would still have to be paid on the sale of the shares. But any gains made in an EIS are free of CGT after three years, so you could profit from the amount that would normally be paid to the taxman immediately.

20.11.2012   Article in London Evening Standard by Lucy Tobin

Saving tax via offshore accounts all sounds a bit Jimmy Carr, but two schemes aimed at cutting tax bills are encouraged by the Government: the Enterprise Investment Scheme and Seed Enterprise Investment Scheme. They mean taxpayers can save as much as 78% of their income tax bill while helping businesses that are finding it increasingly difficult to squeeze blood out of the banking stone.

City financier Rob Holgate has set up a route into the scheme — The GE Club — “out of my sheer frustration at the inability of small companies to raise money from individual investors”. Anyone keen on getting involved, listen to his own proviso: “The GE Club is quite rightly limited to sophisticated investors and high-net worth individuals. There’s no desire to be dealing with those that don’t understand the risk.” Membership is free provided members get involved in at least one activity or offer in a year

Some 200 investors have signed up at thegeclub.com. It could save you tax, and earn you a decent return. But you need to watch out — you could lose your entire investment if the business you back collapses. But even if that happens, the tax relief would mean you would be safeguarding up to two thirds of the investment.

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