Octopus Investments has added a new line to its enterprise investment scheme (EIS) with a focus on companies in the energy sector.
The new EIS aims to provide clients with access to energy-supplying businesses, such as companies developing anaerobic digestion technology or supplying reserve power plants, while also delivering the significant tax benefits that come with an EIS.
Investments in EIS provide a range of tax benefits, including income tax relief, capital gains tax (CGT) deferral, loss relief and tax-free growth, as well as exemption from inheritance tax (IHT).
The minimum investment into Octopus’s new EIS is £25,000 with an initial charge of 2.5 per cent, annual management charge of 2 per cent.
The company recommends that investors allow for an investment timeframe of up to four years.
Comment
A desire to reduce investor tax bills combined with the government’s encouragement to put money into small businesses resulted in the establishment of EISs in 1994. Since then, these products have grown in popularity to reach nearly £10bn of qualifying investments.
Octopus’s latest EIS invests primarily in unquoted energy companies as well as some renewable energy firms. The renewable energy market in particular is a growing sector of the UK economy, as the government extended its target to increase the total amount of energy from renewable sources from 15 per cent by 2020 to 27 per cent by 2030.
A relatively new energy supply technology in the UK, anaerobic digestion is a biological process that generates gas from organic materials, such as food and agriculture surplus. Reserve power plants, a more established sector of the UK energy market, stockpile excess energy to be used by the National Grid in times of high demand. The National Grid recently stated that its reserves are at a seven-year low, making expansion in reserve plants a necessity.
