EIS Fund Complements ISA for Tax Breaks

Risks of EIS investments ‘exaggerated’ says Oxford Capital.


15 February 2010, Oxford, UK

Investors who have already hit their ISA savings limit for the current tax year can continue investing tax efficiently through EIS Funds and save 20 per cent in income tax.  According to Oxford Capital the risk of investing in entrepreneurial growth businesses through EIS investments is often exaggerated and the potential for high returns is better than it has been for several years.

With 50 per cent income tax a reality from 6 April 2010, investors in Oxford Capital’s EIS Funds will receive generous tax breaks from the government.  An investor who subscribes in their Approved EIS fund can crystallize 20% income tax relief in the current 2009/10 tax year.

Ted Mott, chief executive Oxford Capital says:
“I’ve heard much misguided comment saying that EIS investments are unnecessarily high risk.  Of course there is risk in private equity investment, but by using funds such as Oxford Capital’s EIS Funds, investors receive a balanced, diversified portfolio of companies, spread over industry sectors and development stages.  They receive 20 per cent of their investment back as tax relief on investment and they still have the outstanding growth potential of investing in exciting emerging businesses.  Our first fund, for example, returned our investors 164 per cent growth over 7 years and the prospects for many emerging companies are strong at this stage of the economic cycle.

“The tax breaks don’t stop with income tax either. Investors pay no capital gains tax on profits and the entire portfolio is completely free from inheritance tax once investments have been held for two years.  What’s more if one of our portfolio companies does fail, then the government also offers loss relief which can potentially be up to 48% of the value of the original investment.  After a decade when the supposedly low risk S&P index dropped in value by 10 per cent, the idea that a tax efficient, well balanced portfolio of growth companies is high risk is debatable.

“People don’t think about risk logically.  More pedestrians are injured each year than passengers are hurt in aircraft accidents, but you don’t hear people say they are afraid of crossing the road.  It’s the same with EIS Funds – the risks do exist but they are well managed and the tax incentives for investors are fantastic.  Compare that with a cash deposit where typically people are losing 2 per cent in real buying power each year once interest rates and inflation are taken into account.”

The Oxford Gateway EIS Funds invest in a portfolio of entrepreneurial growth businesses and offer generous tax incentives:

  • 20 per cent income tax relief on up to £500,000 of capital per tax year
  • Tax free gains - on up to £500,000 invested per tax year
  • 100 per cent inheritance tax exemption after two years on unlimited amounts
  • The potential to save 22 per cent capital gains tax on gains taxed at 40% in the 2006-07 and 2007-08 tax years under the current 18% rate

Investors can choose to invest in Oxford Capital’s “Approved” EIS fund and receive their income tax relief for the current tax year, or in the “Unapproved” EIS fund, which gives tax relief as the underlying investments are made.

The Oxford Gateway EIS Funds are designed for private investors with a minimum investment of £25,000, up to a maximum of £2 million.  The EIS fund structure was pioneered by Oxford Capital and has the benefit of a fully discretionary portfolio service approach.  The funds have an initial fee of five per cent and an annual management fee of two and a half per cent.  There is a performance fee of 20 per cent of the funds’ net return after 100 per cent return of investors’ capital.

For information about the Fund and Application Forms, please click here.