UK venture capital firm Vala Capital expects to invest all the capital raised by the Vala EIS Portfolio before the end of this current tax year on 5 April.
This will grant investors income tax relief of 30 per cent of the investment value for the current tax year or allow them to carry it back to the previous tax year. Funds offering to deploy capital qualifying for EIS tax relief before 5 April are scarce this year after the Government closed down asset-backed EISs in March 2018.
Jasper Smith, Chairman of Vala Capital, says: “EIS tax relief is only granted once investor money is invested and some EIS managers can even take years to fully deploy. Combine that with the fact there are fewer opportunities overall after the closure of asset-backed EISs last year, and advisers with clients who want their capital deployed promptly have a real problem.
“We’re in a unique position to offer a solution because we have been working on these investments for the past six months. All of them have been subject to our rigorous due diligence process and they are ready to go.”
In order for investors to retain the income tax relief, the qualifying shares must be held for three years. Any gains made on the value of the shares after this will be free of capital gains tax (CGT). A CGT liability on disposal of another asset can also be deferred through investing the gain in the EIS. The shares qualify for Business Relief if held for a minimum of two years, which means they will not then be liable for inheritance tax.
The Vala EIS Portfolio uses a fee structure unique among EIS funds that does not charge initial fees, annual management or administrative charges, audit contributions or custodian costs. Instead, the company charges an initial fee of 6 per cent of the investment to the investee company. The only fee the investor will pay is 20 per cent of profitable exits.
The fund is targeting a 2x return on investment and will be made up of 6-10 EIS-qualifying companies.
Investment-ready companies which might be in investors’ portfolio include Arksen, a company developing a range of semi-autonomous explorer vessels for pleasure, research and commercial purposes, Quvium, a technology and data company creating devices to help manage respiratory diseases and Play.Works, a game development company that produces titles for mobile messaging platforms such as Facebook Messenger.
