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HMRC investment survey (and VCT/EIS sunset clause)

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
cprof
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HMRC investment survey (and VCT/EIS sunset clause)

#507427

Postby cprof » June 15th, 2022, 3:45 pm

My spouse received a letter this morning from HMRC informing her that she has been randomly selected (as an individual who has invested in tax-advantaged schemes) to be invited to participate in a telephone interview run by Kantar Public. She will not be participating as I manage all the VCT EIS investments, thus I have not checked whether it is genuine.

The purpose is stated as " HMRC would like to understand more about the experience of investing in UK companies, as this will help to ensure the efficiences of the tax system and our services"

"efficiences of the tax system" is the worrying term

My thoughts are that this is connected to the sunset clause in the existing legislation that means only investments made prior to 6 April 2025 are eligible for tax relief ( this was a requirement of EU law at the time although it can be altered by secondary legislation). If I were in charge of this at HM treasury it would seem to be a good time to be undertaking a review, particularly the sensitivity to changes in the levels ot tax relief. For instance would a reduction to 25% relief possibly with a higher max annual investment bring the same or even greater investment at a lower cost?

If anyone does participate I would be interested to hear your comments on the nature of the discussion.

There is already some noise in the media from interested parties arguing that govt should make it's plans clear now with respect to the sunset clause as there is a need for forward planning

naflod
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Re: HMRC investment survey (and VCT/EIS sunset clause)

#507432

Postby naflod » June 15th, 2022, 4:23 pm

Hi cprof

It will be genuine, the Revenue also use Kantar to conduct surveys of tax agents on how dealings with the Revenue have been over the preceding year.

naflod

UncleEbenezer
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Re: HMRC investment survey (and VCT/EIS sunset clause)

#507467

Postby UncleEbenezer » June 15th, 2022, 7:05 pm

Now that you remind me, I think I've been surveyed by them in the past.

I've a recollection of one year it happening twice over (doubtless, different teams there). Once as VCT/EIS investor, once as small-biz owner. I don't recollect details (if anything was interesting I'll have blogged it), so just posting to second naflod's observation about it being nothing new.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#507486

Postby Mainwaring » June 15th, 2022, 8:38 pm

I got one too. I will participate. I think they’ve got it right with 30% and have swallowed the new co/ series AB rules as I’m largely invested in those with mature historic portfolios. I will be suggesting the current system is fine and that at lower rates I’d just top up Pensions and ISAs. The industry is evidently lobbying hard but who knows what the political landscape will be in 2025.
I’ve generally recycled tax matured holdings for new but not religiously and if the VCT opportunity looks like closing I’ll be retaining as much as possible for the tax free income.
I’ll post feedback if they phone me.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#507743

Postby Scorab » June 16th, 2022, 9:37 pm

Like Mainwaring I too got the letter and will participate. I too re-cycle (mostly), but if the tax relief were reduced to 25% would look at other opportunities. If Kantar do contact me by phone I'll feedback the general tone/direction of questions.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#507820

Postby Karellan » June 17th, 2022, 8:28 am

Me too , I got one and will take place if requested.

I recall getting tax relief at 40% and that is how I started. The reduction to 30% was a concern but one gets more VCTs. I have a a wide spread of holdings and use it like an annuity. Generally I feel that it works well for me.

The government has always tried to encourage funds to areas of concern and I think that the private nature of this for profit works well and the funds are usefully employed. Much better that HMG giving money to all and sundry which never seems to work well. I think that jobs will still be an issue in 2025 but a reduction in relief would not be welcome as with discounts etc investment can be marginal over the direct buy case. However there may be a new area by then that attracts reliefs , environmental or climate change ?

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#511479

Postby Boots » July 3rd, 2022, 10:43 am

I just received a survey from Wealth Club on the VCT Sunset Clause - I imagine many others here did too.

I felt it was rather biased in favour of retaining the tax rebates. Given Wealth Club's business model that is hardly surprising.

I answered honestly to the effect that the tax rebates are a key part of my decision to invest in VCTs.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#511689

Postby sinterklaas » July 4th, 2022, 5:31 pm

Has anyone had the phone call from Kantar yet?

I got the letter a good couple of weeks ago

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#514600

Postby robtom91 » July 15th, 2022, 1:21 pm

I got the call last night. I was asked if my investment habits would change if:
1. EIS/VCT income tax relief was reduced to 10%
2. There was no loss relief
3. Capital gains was payable
4. and also if there were no restrictions on EIS investment (i.e. can invest in any company).

Naturally my response was "significantly reduce" to 1,2,3 and "increase" to 4. Would be great if EIS could be used to address the lack of investment for scale ups (maybe the 10% could apply to larger companies) but without the 30-50% on smaller companies, there will be a huge funding shortfall in the UK for startups!

UncleEbenezer
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Re: HMRC investment survey (and VCT/EIS sunset clause)

#514720

Postby UncleEbenezer » July 15th, 2022, 11:17 pm

robtom91 wrote:I got the call last night. I was asked if my investment habits would change if:
1. EIS/VCT income tax relief was reduced to 10%
2. There was no loss relief
3. Capital gains was payable
4. and also if there were no restrictions on EIS investment (i.e. can invest in any company).

Naturally my response was "significantly reduce" to 1,2,3 and "increase" to 4.


You say "naturally", but I daresay that's what they expect and the subtext is to gauge the differences in your answers to 1-3.

They're not surveying me, but
(1) would more-or-less stop me investing in VCTs, and direct most of my current EIS budget to non-UK startups.
(2) would somewhat affect my EIS investments, but not VCTs.
(1) and (2) together would render EIS pretty-much worthless.
(3) wouldn't affect me at all.

I wonder if that 10% is flying a kite for reducing to 20% or other intermediate figure?

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#514765

Postby Kidman » July 16th, 2022, 10:47 am

I would have thought that EIS has one advantage over VCTs for HMRC:-
EIS, whether bought as single company investments or via EIS funds, eventually exit and all tax reliefs cease whereas VCTs generally have an indefinite life.

VCTs are now a large sector where no income tax is paid on dividends and if that changed for existing VCTs then it could make for a messy situation.
I note that the removal of income tax relief on dividends was not one of the survey questions.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#514883

Postby james188 » July 16th, 2022, 7:29 pm

I do not have any specific stats to support this view, but I rather suspect that VCTs may be much more efficient in exiting investments (whether at a gain or a loss) in a timely fashion - and then recycling the proceeds/new funds raised into new investments. The two schemes have major differences and I hope that HMRC does not adversely impact a maturing industry (VCTs) that has been so successful in supporting fledgling companies. In fact, I hope that HMRC relax the rules that often prevent VCTs from making follow/on investments in companies that inevitably require further funding rounds. Not holding my breath on that one.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#516058

Postby Vulgaris » July 20th, 2022, 5:53 pm

Had them call this PM. Nice lass called Emma. Same core questions as RobTom91, but gather they have 2 sets - one primarily directed to EIS (which I, and apparently RobTom91, got) and one directed to VCTs, which no one has described yet. All multi-choice and, as ever with the format, incapable of coping nuance. Thus, when asked what I'd do if CGT relief on EIS profits was withdrawn they couldn't handle an answer along the lines of 'I'd therefore invest in VCTs rather than EIS' ... only one that I'd invest more/less/ the same in EIS. I also suggested that their view of 'high risk' (as they think EIS to be) is flawed, since it presupposed that there is safety available somewhere whereas I think not, looking at the int'l situation, at assets over-priced after years of absurdly low interest rates, at half a trillion squandered on a virus with a tiny mortality rate, and at 10% + inflation. I tried quoting Nelson - That the safest course of action is the boldest, but again couldn't be accommodated by multi-choice.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#516106

Postby zxc100 » July 20th, 2022, 11:15 pm

Vulgaris,
I'm afraid I have to take exception to your comment about a "virus with a tiny mortality rate". Having practiced as a physician for 35 years I have never faced as many rapidly deteriorating and frequently dying people as I faced in March to May 2020. I know my colleagues in many instances were profoundly affected by what they faced. I imagine what you have written was not intended to be offensive and it does have a certain political tone to it. I would politely ask you to be a little more circumspect before making such assertions particularly as there may well be people who lost close relatives on the platform.

Zxc

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#516239

Postby sinterklaas » July 21st, 2022, 3:34 pm

Vulgaris wrote:Had them call this PM. Nice lass called Emma. Same core questions as RobTom91, but gather they have 2 sets - one primarily directed to EIS (which I, and apparently RobTom91, got) and one directed to VCTs, which no one has described yet. All multi-choice and, as ever with the format, incapable of coping nuance. Thus, when asked what I'd do if CGT relief on EIS profits was withdrawn they couldn't handle an answer along the lines of 'I'd therefore invest in VCTs rather than EIS' ... only one that I'd invest more/less/ the same in EIS . . . .


Thanks for telling us about your call. Havent had it yet, despite letter arriving weeks ago.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#516260

Postby Vulgaris » July 21st, 2022, 5:05 pm

@Zxc. I don't want to turn this into a debate re. COVID, but have likewise worked in a medical-related field for over 40 years. So, just a swift reply. I agree that the virus has/had substantial mortality in particular demographics and particularly in the first wave. However, overall mortality is v. low compared with great plagues of history. My core points are (1) that the economic and social damage of the response is greater and will persist far longer than anything that the virus could do and (2) that supposing we could control the uncontrollable was a very, very expensive fantasy.

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#518187

Postby sinterklaas » July 29th, 2022, 4:56 pm

Still no phone call…

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Re: HMRC investment survey (and VCT/EIS sunset clause)

#518364

Postby Mainwaring » July 30th, 2022, 6:33 pm

Me neither. I think LemonVCTfools have already told them not to mess with something which is working well.

cprof
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Re: HMRC investment survey (and VCT/EIS sunset clause)

#577264

Postby cprof » March 21st, 2023, 8:56 am

Article in Sharesoc Newsletter Issue 123 (available to those with associate membership which is free of charge). The article refers to VCT's uncertian future for two main reasons
1) 2015 changes have not fully worked through and author ( Roger Lawson) thinks that valuation of early stage companies may be too high
2) Although former chancellor Kwasi Kwarteng postponed the sunset clause in his autumn mini-Budget, extending
tax relief on VCTs beyond April 2025; there may be problems revising the legislation because of the government’s workload.

Roger says he is not investing in further VCT's until he sees how these issues play out.

My only thoughts are that this govt does not seem to particularly value retail investors given the changes in CGT & dividend tax allowance


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