Monday, 21 May 2018

Hands Off Crowdcube approach for Sugru disaster.



We have a copy of the email sent out by Crowdcube to investors in Sugru, the day after we broke the story. Crowdcube valued Sugru at £33m in May 2017. It was sold for next to nothing last week and left shareholders with losses of 91p in the pound.


Firstly thanks to the sender.

We post this here becasue we are not convinced Crowdcube's advice is correct - maybe you would like to comment?

As usaul if you want any advice, Crowdube tell you to go away and get it somewhere else - they cant afford to pay a serious legal team to advise investors. I love the way they don't even have a considered opinion of their own - they push it all onto Smith Williamson - their in house financial advisers. As if you havent lost enough, now Crowdcube advise you to pay for independent legal advice as well - that's real service for you. Whatever you do, dont use Smith Williamson. 

Here it is - 

What impact does this have on EIS?
If you have claimed tax relief from HMRC through the EIS scheme, please note that you will not have reached the full three year period of ownership required to qualify for full relief. 

FormFormForm Ltd has been advised by financial group Smith and Williamson, that if you have claimed EIS tax relief for your investment, you should anticipate having to refund a proportion of the relief to HMRC, based pro-rata on the duration you have held the shares as a proportion of three years. In some cases, shareholders may be entitled to some relief on the loss suffered. However, you will need to seek independent tax advice relevant to your own unique circumstances.   

3 comments:

  1. My understanding is that a sale within the three year period invalidates the EIS relief which would need to be repaid.

    Did they provide a reference to where in the tax manual it says 'pro-rata on the duration you have held the shares as a proportion of three years'?

    --AH

    ReplyDelete
  2. This is what I found.
    Of course if you rely on this at all you are a bigger fool than me etc...

    Looking at SR advice :-
    https://www.syndicateroom.com/learn/exit/seiseis-what-happens-if-one-of-my-investments-fails
    (some useful information in these pages)

    Paralleling the nice example there

    Put £500 in
    Tax relief 500 * 0.3 = 150
    Net cost 350
    Proceeds from sale 507 * 0.09 = 45.63

    If the company fails within three years following the investment, initial income tax relief of £13.70 (=> £13) (=£45.63 x 30%) would be clawed back

    .. so that the net cost of the investment would be £363 (500 – 150 + 13 = £363).

    The investor would therefore have to pay £13 income tax back
    .. but could claim income tax relief of 40% x £363 = £145.2 (=>145)

    resulting in a net cost to the investor of £172.37 (363 - 145 - 45.63 = 172.37)

    If anyone has a better source / different answer, please post it.


    ReplyDelete
  3. This tallies with my post on the other thread. I have no idea what the pro-rata bit is, but didn't test it with HMRC when I called them. I think it's a red herring. It's all about the financials, not the timings (unless more than three years, which is not the case here). The main thing is that you don't have to pay back all the EIS.

    ReplyDelete