Information Memorandum - Foresight Group

SUMMARY OF TAX RELIEFS
TAX TREATMENT WILL DEPEND ON INVESTORS’ INDIVIDUAL CIRCUMSTANCES AND ALL POTENTIAL
INVESTORS SHOULD, THEREFORE, SEEK TAX AND FINANCIAL ADVICE BEFORE INVESTING.
YOU MUST HOLD EACH INVESTMENT FOR A THREE YEAR PERIOD TO RETAIN THE EIS RELIEFS
SUMMARISED BELOW. EIS RELIEFS ARE ONLY AVAILABLE ON YOUR INVESTMENT IN EIS
QUALIFYING SHARES.
YOU SHOULD SEEK ADVICE IN RELATION TO TAX RELIEFS. A MORE DETAILED EXPLANATION
OF THE TAX RELIEFS AND EIS REQUIREMENTS ARE SET OUT IN PAGES 24 TO 25.
Income tax relief
Eligible Investors can reduce the amount of income tax
they pay by 30% of the amount invested in EIS Qualifying
Investments made through the Fund. As an example, if an
Investor invests £100,000 in EIS qualifying Investments
through the Fund, the Investor can reduce the amount of
income tax paid by £30,000. This relief is available on the
first £1,000,000 of EIS qualifying investments in each tax
year. If an Investor invests more than £1,000,000 through the
Fund in any tax year, the reduction in their income tax bill for
that year will be £300,000. The amount of income tax relief
claimed cannot exceed that which an eligible Investor is
due to pay.
Eligible Investors can claim the relief against their income
tax liability in the tax year that Foresight makes each EIS
qualifying Investment or such relief can be carried back for
the preceding tax year to the extent the eligible Investor has
not used their annual limit in the previous tax year. EIS income
tax relief in respect of investments made in the 2013/2014 tax
year may be carried back into the 2012/2013 tax year up to the
annual limit of £1,000,000.
Capital gains tax deferral relief
Eligible Investors can defer capital gains up to the amount
invested in Investments made through the Fund. This
applies to gains made in the three years before the effective
date (see timing below) and future gains made up to one
year after the effective date. Gains are deferred until the
Investor sells their EIS qualifying Investments that Foresight
has made for them through the Fund. Capital gains tax will
apply to the deferred gain at the rate in force when the
Investments are sold.
Capital gains tax exemption
Any capital gains realised on a disposal of Investments made
through the Fund after the Three Year Period, and on which
EIS relief has been given and not withdrawn, will be capital
gains tax free. Any capital gains realised on a disposal within
the Three Year Period will be subject to capital gains tax, at
the current rate which is either 18% or 28% for individuals
(the tax rate used depends on the total amount of the
individual’s taxable income).
Inheritance tax relief
Once an Investment made through the Fund has been held
for two years, eligible Investors should qualify for 100%
Business Property Relief. This means that an Investment will
be an exempt asset for IHT purposes, provided the Investment
is held at date of death.
Business Investment Relief
The Finance Act 2012 includes provisions whereby nondomiciled
residents can use untaxed overseas income or gains
to invest in the UK in qualifying investments without making a
04 FORESIGHT SOLAR EIS FUND 3
taxable remittance under the Business Investment Relief (BIR)
scheme. This major new relief offers non domiciled residents
who have foreign income or gains that would be taxable on
the remittance basis if brought to the UK a major opportunity
to make commercial investments in the UK, into qualifying
investments.
Amounts remitted to the UK must be invested within 45 days
of being brought to the UK. If the investment is aborted after
funds have been brought to the UK, then no UK tax charge will
arise providing the funds are taken overseas within 45 days of
the day that they originally came to the UK.
On the disposal of a qualifying investment the investor has 45
days from the date of receipt of the proceeds to take overseas
the proceeds or to make another qualifying investment.
Special rules apply where the investment is part sold or
proceeds are below cost. EIS Qualifying Companies in which
Foresight Solar EIS Fund 3 invests will be eligible companies
for BIR and the Receiving Agent has an offshore bank account
to hold such cash. If you are non-domiciled and wish to invest
using BIR, please contact Foresight’s Sales team on 01732
471812 for a bespoke application form.
Timing
EIS tax reliefs become available each time that Foresight
makes an Investment in EIS Qualifying Companies. For
example, if Foresight makes the first Investment in October
2013 and commits 25% of the amount subscribed to the Fund
to that Investment, then October 2013 is the effective date for
working out the timing of eligible Investors’ tax relief on that
Investment. Each Investee Company will issue EIS3 certificates
as soon as practical following a period of trading of not less
than four months, which will be sent to eligible Investors by
Foresight for that Investment. These certificates provide the
evidence required to claim income tax relief and capital gains
tax deferral relief. Foresight would expect to send these EIS3
certificates to Investors towards mid 2014.
Foresight intends to fully invest the fund into EIS Qualifying
Companies during Q4 2013 and no later than 5 April 2014
Generally, the Fund Manager reserves the right to return
uninvested funds if it concludes that the funds cannot be
properly invested.
Loss relief
If any of the Investments were realised at a loss, Investors
would be able to set the loss against their income and/or
capital gains when calculating their liability to income tax and/
or CGT in the year of realisation. This means that an Investor’s
maximum potential losses should not exceed 42% of their
total Investment after taking the income tax and loss reliefs
into account assuming that an Investor’s marginal rate of tax is
40% (if an Investor’s marginal rate is 45%, then the maximum
exposure would be even lower at 38.5%).