A taxing time

The Japanese earthquake and tsunami has shocked everyone around the world and our thoughts are with the Japanese people as they start the task of reconstruction. As the full scale of the disaster unfolds the financial markets are still trying to assess what the eventual fall out will be. At the time of writing, whilst the FTSE has fallen it has not taken the nose dive that some might have expected whilst oil prices also fell on the back of an expected reduction in Japanese demand in the short term.

Although the picture will take some time to clear, the Japanese disaster may provide some investors with the impetus to review their investment portfolio. With the end of the current tax year fast approaching any portfolio rebalancing should take into account the potential tax implications of investment decisions with steps taken to maximise tax savings.

One avenue open to higher rate tax payers is that of investing in an Enterprise Zone Syndicate (EZS). A staple of UK tax planning for the past thirty years, Enterprise Zone investments have contributed towards the successful regeneration of deprived areas of the UK, most noticeably in the Canary Wharf development. Syndicates open for investment at present include schemes in Newcastle Upon Tyne and North Lanarkshire.

The Government has announced its intention to promote further Enterprise Zones to help to regenerate the UK’s deprived areas but whether they will follow the same funding path as current schemes is presently unknown. Whilst we wait for details to be announced, the current tranche of EZS schemes expire at the end of this tax year and places in the remaining syndicates are filling up fast.

Investment within an EZS is typically made via a combination of direct investment and limited recourse loan. Depending on the scheme chosen and the investment mix 50% tax payers can find themselves cash rich to the tune of just under £20,000 following the investment. The schemes are also worth considering for 40% tax payers who can finish up cash rich to the tune of just over £9,500.

Newshams recommends that those interested in investing in an EZS contact them as soon as possible to allow time for tax positions to be fully explored by the end of the tax year.

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