Creative Industry Tax Reliefs (CITR) are a collection of Corporation Tax reliefs that allow qualifying companies...
How can the government’s Seed Enterprise Investment Scheme (SEIS) and the larger sized EIS bring you annual inheritance tax savings and protect your family's wealth?
SEIS offers exemptions of up to £100,000 from inheritance tax (IHT) per tax year (a saving of £40,000). You just have to invest in an early stage start-up and hold for two years. However, if the business has traded for more than two years, you can use the EIS scheme to invest up to £1m per year with a saving of £400,000.
A recent report revealed that 1 in 10 Brits have assets over one million pounds, the largest being their home. As such, their beneficiaries could face an inheritance tax bill of £270,000 or more.
Today we're going to discuss:
SEIS, made permanent in the 2014 Budget, is the most generous tax scheme ever created by any UK government. Simply invest in a new company less than two years into their trading history (up to 30% of the company).
Within just two years the shares are exempt from inheritance tax. Here is a comparison table of all the inheritance tax savings available:
|Tax reliefs||SEIS £100,000 per year maximum||EIS £1m per year maximum|
|IHT||100% after two years||100% after two years|
|50% of the investment amount||30% of the investment amount|
CGT on investment
|50% CGT exemption||100% CGT deferral|
|100% on unrelieved amounts||100% on unrelieved amounts|
CGT on disposal
|100% exempt||100% exempt|
You can be a director of the company and receive income and dividends as you would normally with any other business. Just make sure you check the latest rules regarding timings and the relationship you have with the company prior to issue.
Whatever your situation, we can help you find the right investment opportunity.
For example, the rules prohibit investors from being 'connected' with the company. If you aren't sure if this applies to you, we'll work back from your current situation to get the maximum inheritance tax relief, while staying within the rules.
If you're worried about the security of your investment, there are safeguards we can help you put in place. For example, you could make sure you are the sole director and the sole signatory of the bank account.
The business doesn't even need to be profitable to be a good investment. As long as it turns over the investment amounts within three years, it could break even and still safeguard your assets for your beneficiaries.
Of course, many people will have children or friends who are starting their own businesses. This would be a tax efficient way to invest together and still retain the value of those shares.
Since we've been practising, we've integrated SEIS and EIS funding with the following businesses:
When we work with new business start-ups, we put the right structures in place for you. This allows you to focus on the trade without worrying about anything else. We'll always show you clear strategies on how to implement all of your systems, with transparent timings and costings. We want to be part of your team helping you to succeed.
We implement automation as a service (AaaS) with online, digital software solutions wherever possible. For bookkeeping systems, we prefer the Xero platform which can integrate with add-ons. We keep all of our records in the cloud accessible at all times, and take view-only access of your systems to reduce time and costs.
If you're interesting in working together for great annual inheritance tax savings, get in touch.