Everyone loves a PUNT…

BUT DO THEY REALLY UNDERSTAND THE ODDS?

WELCOME TO THE VN CAPITAL PARTNERS ONLINE EXPERIENCE

This portal is for investors, qualifying potential investors, and IFA’s alike.

Information about our company, the team, and SPV projects can all be found here, together with a support library of PDF document downloads and project videos.

The purpose of this site is threefold:

  1. To provide qualifying potential investors sufficient information about VN sponsored projects to allow them to make an informed investment decision
  2. To provide existing investors visibility of their current VN project portfolio and update information on the particular SPV’s they have invested in
  3. To provide VN-CP registered IFA’s, Wealth Managers and Intermediaries the following support;
  • Project and due diligence information for compliance
  • Individual support and bespoke services to enable clear and concise advice to clients
  • Introductory fee structures and incentives.

But before you enter the site let me draw your attention to what should be obvious but because of  marketing language such as low or medium risk’ used by certain promoters and product providers, may not be. All SEIS and EIS Projects are a gamble or in racing vernacular a ‘Punt’ and VN sponsored projects particularly so, as they deal with ‘bleeding edge and disruptive technology developments’.

This should not alarm you however, just alert you the first rule of investing i.e. ‘Use Common Sense’.

Please read on and enjoy the site content, we seek to constantly improve our communication with visitors so all feedback (good & bad) is appreciated.

Thank you for the interest in our company and our sponsored projects.

Kind regards

David Newman

Chairman

To be successful at any form of gambling you need to fully understand the opportunity, risks, odds, marketplace and competition. If these factors are not considered, then the likelihood of losing all your money is extremely high. SEIS and EIS are by definition ‘High Risk’ – ‘High Reward’ opportunities, where if the same processes are not followed the outcome is almost certainly to be the same as a ‘Bad day at the racecourse’.

If we accept this assumption, then what exactly is the difference between investing in Tax Incentivised Alternative Investments and a ‘Punt’ on the Grand National?

Simply put, a bookmaker will take all money placed with him and give ‘risk vs reward’ odds on a specific gamble. If the gamble fails, you lose all money placed, in other words a ‘no stop loss’ proposition. If the gamble is successful, you are rewarded at the odds agreed and pay no tax on the winnings.

With an SEIS Investment (maximum £100k per individual pa) the Exchequer allows 50% of all monies invested to be immediately set off against income tax due, and in the event that the project fails, a further 45% of of the balance can be claimed as loss relief. So the actual gamble has a ‘stop loss’ position of 27.5p in the pound.

In the event of a successful project, subject to the shares being retained for the minimum 3-year period, all gains made are free from tax (CGT or Capital Gains Tax).

With an EIS Investment, (maximum £1m per individual pa) the Exchequer allows 30% of all monies invested to be immediately set off against income tax due, and in the event that the project fails, a further 45% of of the balance can be claimed as loss relief. So the actual gamble has a ‘stop loss’ position of 38.5p in the pound.

In the event of a successful project, subject to the shares being retained for the minimum 3-year period, all gains made are free of tax (CGT or Capital Gains Tax).

Certain product providers and Advisors would have you believe that some SEIS and EIS projects can be a ‘Safe Bet’, a term in direct contradiction with HMRC guidelines for such investment opportunities.

Over the past 10 years or so Product Providers & Funds have been consistently marketing and selling “safe” Enterprise Investment Schemes. Some were tied into the UK Government Feed-In-Tariff strategy i.e. providing investors with ‘upfront’ tax relief and ‘guaranteed ‘exit profits’ via renewable energy development schemes. This practice was fortunately outlawed by Government in the last budget, but not before it had cost UK SME’s hundreds of millions of pounds in lost investment. Is that the end of the story, well if we look at HMRC’s approach taken in hindsight toward Film Schemes, one might argue that the possibility of relief withdrawal for those renewable investors is quite possible, certainly reducing the value of their ‘safe punt’ or even negating it completely.

Today those same Funds and Providers are looking for new ways to get round the rules and it is the nature of such organisations to do so as they seek a commercial edge, but for you the investor it really begs the question: ‘Why are you investing’?

Investment in an SEIS or EIS project has two completely different risk components:

1/ Income Tax / Loss Relief

2/ Project success or failure

When considering investing it is imperative to ascertain that the project has HMRC Advanced Assurance and will continue to qualify for relief throughout the life of your investment. Without this component you are simply back at the racetrack.

Risk Considerations –  Is the EIS/SEIS Tax Relief at Risk?

When looking at Investments into EIS or SEIS, you should look at the nature of the company as well as the company itself, i.e. What is the business doing, and how is it doing it?

Recent HMRC clamp-downs and court cases have demonstrated that previously acceptable EIS operations are now, no longer allowed by HMRC. This area should be of particular concern to Investors, as Investments described as “Low-Risk”, “Guaranteed returns” or even “Tax free returns of X% per annum” need to be looked at very carefully indeed. If nothing else, an investor should factor in the risk of not just business success or failure, but also whether the initial tax relief will stand up to HMRC scrutiny in the future.

History has shown us that in the eyes of Government – ‘Everything is Guaranteed Until it Isn’t’. So whether you decide to invest in a “high-risk” or “low-risk” EIS or SEIS, try to remember, if it looks to good to be true, it probably is!

Project success or failure should be the only ‘risk’ component if the scheme is used correctly, and as mentioned before, some research, in-depth reading coupled with common sense Q&As, should give you enough information to make a reasonable decision, it is a Punt after all.

Some obvious questions for a start-up or development project should include, questions like:

How much does it cost to raise the funding?

Where do the fees go and for what?

What will the funding be spent on?

Is there a business plan?

What is the monthly salary bill?

What are the the operating costs?

Who are the competition?

What will differentiate this company from the competition?

Why?

For how long?

What is the projected time to market for revenue creation?

What is the projected time to market for ‘breakeven’?

What is the projected time to market for profitability?

What are the projected returns to investors?

What is in it for the Investor? How? Why?

As well as the above, the business plan should also show the timeline and deliverables and all of this should be considered by Investors to be the minimum requirements for you to spend your time investigating further.

Just like the Grand National, the excitement is palpable as you research the investment opportunities on offer deciding which project to pick. However, unlike the National you have a fixed stop-loss, which means that your maximum loss on a £1 EIS investment is 38.5p.

It is now universally accepted that once you have found the right asset allocation and picked the right investment portfolio for your needs, you still need to pick the investment products to fill it out and manage it throughout the year. As part of a strategy for a balanced investment portfolio for a High Net Worth Individual, Sophisticated Investor or Professional Investor, the high risk elements of this strategy can be equally important as the ‘low-risk’ elements when considering the overall returns of the portfolio. In fact, given recent events in the global financial markets, no asset or portfolio allocation can be regarded as guaranteed, and so all of it is effectively a gamble of sorts

However, not losing money, is also not making any money, which in investment terms is not beneficial to a portfolio when things like fees are taken into account. For example, research by JP Morgan recently found that a very basic portfolio split half-and-half between shares and bonds and held for five years would have protected investors from all but the smallest losses in recent decades.

The bank looked at all five-year periods, starting at monthly intervals, since 1950 and found that the biggest loss was 1% a year, or a little more than 5% in total.

By contrast, anyone who invested entirely in shares would have seen a maximum annual loss of 7% over five years – a much more significant combined loss of 42% after compounding.

Anyone holding this simple mixed portfolio for 10 years would never have lost money since 1950, the research found, no matter which month they started in – even if it was just before a big stock market crash.

This is not to say that a portfolio consisting of 50% shares and 50% bonds is the right one in all circumstances or for all investors. But it does illustrate the importance of considering the mix of investments in your pensions, Isa’s or other long-term savings plan.

Also when looking at a portfolio ‘risk vs reward’ needs to be considered. As a broad rule of thumb most fund managers accept that in a medium to large portfolio the numbers usually look something like this:

50% of the portfolio in capital preservation

25% in low risk growth asset backed instruments

20% in medium risk growth instruments,and

5% into high return opportunities.

The 5% element (subject to the portfolio size) should then be looked at as a whole and sub divided into investable amounts with varying levels of risk vs reward opportunities, such as SEIS and EIS.

The information provided above is in reality a ‘snapshot’ of the SEIS/EIS market opportunity and we have tried to cover the known points, as well as uncover the less well known aspects of these type of schemes.

The most important point to take from this information is simply this:

SEIS and EIS are essential tools in the Governments armoury to ‘Build a Better Britain’ within the innovation and technology development sectors. The tax breaks going in are good, and upon successful exit even better, but the projects have to be real.

DN-Signature

David Newman

Chairman

In 2016 approximately £200 million was wagered the Grand National & most of it was lost. 

According to HMRC figures, approximately £1.6 billion was projected to be wagered on SEIS and EIS Alternative Investments the same year.

In 2013-14, companies from the Hi-tech, Energy & Water supply and Business services sectors accounted for over £1bn of investment and made up over 67% of all EIS investment. These sectors accounted for over 55% of all EIS investment in 2012-13. The figures based on the number of companies show a different distribution, with the highest number of companies being in the Hi-tech, Business services and Distribution, restaurants and catering industry sectors. These sectors represent 66% of all companies receiving investment through EIS.

Following the changes made regarding investment in renewable technologies and the exclusion of ‘feed-in-tariff’ from the equation, the landscape in 2016/17 looks completely different as do the projected returns. 

Returns offered range from ‘get your money back’ (Octopus EIS Tranche 19) right through to projects such as VN Automotive providing 1st Round investors with gains of 25 times and 2nd Round investors with gains of 6 times.   

 

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