BUSINESS INVESTMENT RELIEF. Private company investing for non-domiciled ordinary UK residents

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1 BUSINESS INVESTMENT RELIEF Private company investing for non-domiciled ordinary UK residents May 2014

2 Rockpool is an independent firm dedicated to creating tax-efficient investment opportunities for individuals. Members of our team have helped over 10,000 individuals invest in private companies. If you d like to find out more, please contact us team@rockpool.uk.com Please read this document carefully, think about the risks involved in investing in unquoted shares and loans in smaller companies and talk to your financial adviser about how Business Investment Relief could work for you.

3 With Business Investment Relief, you can bring overseas income and gains into the UK without paying UK tax on the remittance. This simple and HMRC approved relief was introduced in The funds brought into the UK must be invested in qualifying companies. When the investment is sold, the capital must be reinvested or transferred back out of the UK, but income and gains from these companies can remain in the UK without suffering tax on remittance. Business Investment Relief is available for a wide variety of unquoted company investments, some of which can also qualify for income tax and CGT reliefs under the Enterprise Investment Scheme and be exempt from inheritance tax through Business Property Relief. Rockpool offers a flexible and transparent route to the benefits of Business Investment Relief. You keep control over the investment strategy, while we do all the work of finding and transacting private company investments and representing investor interests through the life of each investment.

4 IS BUSINESS INVESTMENT RELIEF RELEVANT FOR YOU?

5 Investing with Business Investment Relief may be attractive if you: Are UK resident and non-uk domiciled and claim the remittance basis of taxation. Have foreign income and/or gains. Wish to allocate part of your wealth to investments in share or loan capital in one or more unquoted companies in the UK. E Business Investment Relief can be combined with the Enterprise Investment Scheme (EIS), making it even more attractive if you have liabilities in the UK for: B I S R income tax. Gains realised in the last 3 years or to be realised in the coming year. B I R P R Business Investment Relief can also be combined with Business Property Relief (BPR), so that money brought into the UK can be outside your estate for inheritance tax purposes, provided that you have held the investment for two years at decease. This could be valuable if you are later deemed UK domiciled, so that overseas assets are included in your estate.

6 CREATE YOUR OWN RISK PROFILE

7 Business Investment Relief allows investment in a wide range of companies. Our service is designed to let you take advantage of this flexibility, defining the risk profile that you prefer. You can: Invest in a single company or build a portfolio. Invest in shares or loans or both. Lend via a personal company to gain inheritance tax exemption through BPR. Choose EIS-qualifying companies, accepting the restrictions of EIS investment in exchange for the tax benefits. How BIR fits with other tax reliefs BIR Loans of shares in any quoted company BPR Lending via a personal company EIS Shares only and subject to limitations All EIS qualifying companies should qualify for BIR and BPR. All BPR qualifying companies should qualify for BIR.

8 CASE STUDIES Rockpool offers a wide range of private company investment opportunities, including shares and loans. Some of the investment opportunities are designed to minimise risk. Others target high returns. You are free to choose the risk and return profile that suits you.

9 ASSET-BACKED BUSINESS Senior loan 66% loan to value against long leasehold property. Three-year term. Cash interest at 10% per annum. EIS qualifying shares Mezzanine risk profile due to projected 120% asset backing. Liquidity event planned for year 4. 20% compound annual return target with EIS reliefs. Alternative for longterm hold with 8% dividend yield and exemption from inheritance tax. Aegis Data Holdings operates a data centre near London. This facility has excellent connections to the internet, high power grid availability and a power-efficient design. The data centre is a readily saleable and tangible asset, providing an element of downside protection to investors. INFRASTRUCTURE INVESTMENT Key features Council rent guarantee underpins income. Low cost senior debt leverages returns. Investment structured as a loan, plus equity at nominal cost. Freehold assetbacking. 7.1% initial interest rate. Gains on equity targeted to increase overall return to 11% per annum (IRR). Sorogold Street owns the freehold of an estate of 27 houses built to house vulnerable adults. The local council has guaranteed the rents for 20 years.

10 MANAGEMENT BUYOUT Mezzanine loan Cash interest at 10% per annum. Equity warrant increases target IRR to 21% per annum. 5-year bullet repayment. EIS qualifying shares Minority equity stake. Strong investor protection rights. Target return of 5 times net cost with EIS reliefs. Airedale Catering Equipment Group supplies and installs catering facilities for commercial customers, such as schools, hotels and hospitals. Over the 2 years before investment, sales grew by 80% to 18 million, producing profits of 1.3 million. The investment was made to support a management buyout of the business. The aim is to double profits over a 3 year period and realise capital gains through sale to a larger business or a secondary buyout. CONSTRUCTION PROJECTS Senior loan Cash interest at 10% per annum. First ranking security. 3-year term. EIS qualifying shares Liquidity event planned for year 4. 18% compound annual return target with EIS reliefs. Rivington Construction is arranging the construction of a care home under a fixed price contract. Its customer is part of a well-established care home group, which owns the freehold of the site. The company has a charge over the freehold to secure payment of the contract price. The aim is to achieve an exit for investors as soon as possible after the 3-year EIS minimum holding period.

11 How to access private company opportunities FOR THE WIDEST CHOICE TO MITIGATE INHERITANCE TAX THE ROCKPOOL NETWORK ROCKPOOL S MANAGED INHERITANCE SERVICE We send you a blueprint for each opportunity as it arises. You decide whether to invest. You have access to all our deal opportunities, including loans and shares, many of which will be EIS-qualifying. You can invest in your own name or through personal companies, SIPPs and trusts and on behalf of your spouse and minor children. Minimum investment per company: 10,000 A discretionary service designed to deliver exemption from inheritance tax through Business Property Relief. We invest for you in the shares of companies, which provide loans to infrastructure projects and other commercial borrowers. Minimum investment: 50,000 IF EIS RELIEFS ARE YOUR FOCUS FOR BESPOKE ESTATE PLANNING ROCKPOOL S EIS PORTFOLIO SERVICE ROCKPOOL S BESPOKE INHERITANCE SERVICE A flexible way to build your own portfolio of EIS-qualifying shares. The EIS tax reliefs enhance returns and reduce risk. You set your own strategy for risk, return, liquidity and diversity, leaving the selection of companies to us. Alternatively, you may choose just the companies you like. Minimum investment: 10,000 Use a personal company to gain the benefits of Business Property Relief while keeping full control of your assets. Your company gets direct access to lending opportunities, which are sourced and administered by Rockpool. Minimum per loan: 100,000

12 Understanding Business Investment Relief Business Investment Relief allows you to remit foreign income and gains to the UK without paying any remittance charge. There is no limit on the amount of Business Investment Relief that you can claim. In order to gain relief you must: Select qualifying companies You can invest in shares and/or loans of any unquoted company carrying out a business in the UK. Excluded: Non-corporate entities such as partnerships and sole proprietorships. Not excluded: Companies involved in property development or rentals. A company which you control or in which you or your connected parties are involved. All of the Rockpool share and loan opportunities meet these rules. Keep to the 45 day rule You must: Make the investment within 45 days of the foreign income or gains entering the UK. On sale of the investment, take the amount originally invested back offshore or reinvest within 45 days. Rockpool provides an offshore custodian bank account for cash pending investment and for the proceeds of investment disposals. We will ensure that the 45 day time limit is met. Make your claim to HMRC in time Your claim for Business Investment Relief must: Reach HMRC on or before 31 January following the end of the tax year in which you made the investment. Rockpool will provide the information that you require relating to the investee companies Avoid receiving any benefit from the company You must not: Receive or allow your connected parties (spouse, civil partner, children/grandchildren under 18, close company or trust) to receive from the company any benefit unless it is on an arm s length basis and in the ordinary course of business. A market rate salary for work is allowed. Rockpool investee companies will not pay benefits to investors.

13 Who makes the investment? The investment does not need to be made personally by you. You can claim Business Investment Relief against your foreign income and gains in relation to an investment made by your spouse, civil partner or children/grandchildren under 18, or by a close company or trust in which you are a shareholder or settlor. Taxation of investment returns Income and gains on investments are treated in the same way as any other UK income and gains. Gains on sale of investments will be liable to UK Capital Gains Tax. You may be able to reduce your liability to income tax and CGT by reinvesting under the Enterprise Investment Scheme. Advance assurance We will confirm that each company is a qualifying investment. You may wish to seek advance assurance from HMRC about the personal circumstances of your intended investment. Rockpool has a panel of advisers who can help you obtain advance assurance at a modest cost. HMRC will only provide advance assurance in relation to genuine points of uncertainty. In this respect, the advance assurance procedure for Business Investment Relief differs from the procedure under the Enterprise Investment Scheme, where advance assurance is typically sought as a matter of course. If HMRC does give you advance assurance, you will generally be able to rely on HMRC s advice, provided you have given HMRC accurate and complete information and you carry out the proposed transactions exactly as you describe them. Warning You should take professional tax advice before remitting foreign earned income and gains to the UK.

14 Why choose Rockpool? Our investors enjoy the flexibility and transparency of direct investing without having to do all the work themselves. Investing with Rockpool means: Freedom to choose when and where to invest No commitment to a fund or a narrow investment strategy Access to a flow of private companies across a wide variety of sectors Clear and simple assessments of each opportunity Support of a professional team post investment No management fees for you to pay The Network effect Rockpool creates private company investments for a network of successful entrepreneurs and senior professionals, who invest their own money directly into the opportunities we offer. This network gives us access to hidden opportunities, anchors our decision-making and enables us to contribute more to the success of private companies. Thorough preparation Our team of private company experts search for well-positioned businesses, carry out in-depth due diligence on each potential investment and seek to negotiate attractive terms on behalf of our investors. Once we are satisfied that an opportunity meets our quality standards, we provide a report to our investors. Whether to invest or not is up to you. Diverse range of opportunities We can help you invest in businesses in a wide range of sectors, enabling you to diversify your unquoted company portfolio. Our focus is on profitable private companies based in the UK. Looking after your portfolio We work with the management team of each investee company, guiding them through the whole process from investment through to exit. We act as investor representative, monitoring performance and standing up for investor interests. Keeping you informed We provide an annual investment review on each investee company, which includes the latest valuation. You will also receive a less formal update, including company news, at least every six months.

15 Rockpool makes it easy for you to build a portfolio of tax-efficient unquoted investments.

16 This document constitutes a financial promotion pursuant to Section 21 of the Financial Services and Markets Act 2000 and has been approved by Rockpool Investments LLP, which is authorised and regulated in the UK by the Financial Conduct Authority (FCA firm number ). Nothing in this document should be regarded as constituting legal, taxation, investment, or other advice and prospective investors should consult their own professional advisers before investing. If you invest through the Rockpool EIS Portfolio Service, the Rockpool Inheritance Service, or as a member of the Rockpool Network, you will do so under the terms and conditions set out in the application form provided by us. This document does not constitute, and may not be used for the purposes of, an offer or invitation to treat by any person in any jurisdiction outside the United Kingdom. This document and the information contained in it are not for publication or distribution to persons outside the United Kingdom. It does not constitute a public offering in the United Kingdom. Rockpool has taken all reasonable care to ensure that all the facts stated in this document are true and accurate in all material respects. Rockpool s registered office is at: 52 Grosvenor Gardens, London, SW1W 0AU. To contact Rockpool, please call or team@rockpool.uk.com