Lee Smythe, managing director of Smythe & Walter Chartered Financial Planners, delves into the tax breaks that could make sound ethical investments even more attractive.
There are many mainstream options for ethical investors, such as funds which exclude certain sectors, like arms or tobacco, or which target specific themes, such as renewable energy or waste recycling.
However, investments with a restricted scope often struggle to compete with the wider market due to the comparatively limited range of options for the fund managers. This is where the potential to take advantage of certain tax breaks can add value to certain areas of green or ethical investment, particularly in the renewable energy, recycling and energy efficiency arenas.
Before we look at the potential tax benefits, it is worth considering that the ‘tax tail’ shouldn’t wag the ‘investment dog’ and the viability of the underlying investments should be considered on sound principles first.
The UK renewable energy sector is estimated to be worth £120 billion and is being driven by both economic and political factors such as rising energy costs and global concerns over climate change. With increasingly supportive government policy and regulation (under the target of the 2009 European Renewable Energy Directive, the UK must ensure that 15% of energy consumption comes from renewable sources by 2020) it is expected that this growing sector could be pushed to £150 billion by 2014-15.
Other initiatives supported by the government are also targeting energy efficiency, as electricity and gas prices have risen considerably above the rate of inflation over recent years and it is estimated that up to 30% of energy bought by businesses is wasted. In another sign of the government’s commitment, David Cameron stated in April that, “We are putting energy efficiency where it should be; at the heart of our energy policy”.
It would seem that the case for investing in renewable energy and energy efficiency is based on a solid ground, so what tax breaks could make such investments even more attractive?
The two principle structures which are used to provide access to these investment areas in a tax efficient manner are Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT).
An EIS provides direct investment in unquoted companies which satisfy certain conditions regarding their size and type of trade. In exchange for holding for a minimum period of three years, investors benefit from the following:
– 30% income tax relief
– No Capital Gains Tax on disposal
– Free from Inheritance Tax after two years
Most schemes provide access to a range of underlying investments to spread risk, and estimated returns are generally high once the tax relief is included, although these are never guaranteed and like most investments there is a risk to the money you invest.
For example, a new EIS share bought for 100p would benefit from 30p tax relief, leaving a net cost of investment of just 70p. If you were then to realise say 112p from your investment four years later, your effective profit would be 60%, and this is tax-free.
VCTs in comparison are quoted collective investment vehicles similar to Investment Trusts. They were designed to encourage investment in to smaller companies by giving investors significant tax advantages. VCTs now have a minimum holding period of five years and investors benefit from:
– 30% income tax relief
– No Capital Gains Tax on disposal
– Tax-free dividends
Whilst the five-year holding period of a VCT may seem less attractive than an EIS for the same 30% upfront tax relief, the availability of tax-free dividends, especially where buying into an established portfolio of assets, can provide a real boost. Some VCTs offer tax-free dividends of around 5% per annum, which for a 40% tax payer would be the same as receiving a return of 8.33%.
There are a range of options available, with minimum investment levels starting as low as £3,000, although they will not suit all investors. The majority of schemes are only available for short periods as they seek to raise limited amounts of money for specific projects and the more popular schemes from experienced managers with strong track records tend to fill up fast.
It is therefore important to seek professional independent advice if you wish to consider such schemes as your adviser will be able to look at which options are available at the time and fully explain the risks as well as the potential benefits which you may receive.
In conclusion, these sectors offer excellent potential with support from government legislation driving the size of the market and government tax benefits providing additional incentives to investors.
Lee Smythe is managing director of Smythe & Walter Chartered Financial Planners, based in the south east.
National Ethical Investment Week runs until Saturday, October 20. Join the movement on Twitter using the hashtag #NEIW12.
What Kitchen Suits Your Style? Modern, Classic or Shaker?
A kitchen is the centre of the home. Your kitchen ranges between where friends and family gather, talk about their day, cook meals, have drinks, to somewhere you can just enjoy each other’s company. The kitchen is the heart of the home. But, everyone’s lifestyle is different. Everyone’s taste is different. So, you need a kitchen that not only mirrors your lifestyle but matches your taste too. Whilst some prefer a more traditional design, others want a modern feel or flair – and it’s all down to personal taste.
When it comes to redesigning your kitchen, what style would you go for? It’s a difficult one isn’t it. With so many different styles to go for, how can you know exactly what you want until you’ve seen it in action? Leading kitchen designer, Roman Kitchens, based in Essex, have provided three examples of bespoke kitchens and styles they specialise in, accompanied with beautiful images. This design guide will get you one step closer to picking your dream kitchen for your home.
New home in the city centre? Or even a sleek new modern build? You want a trendy and modern kitchen to reflect your city lifestyle. In modern kitchen design, colours are bolder and fresher, with sleek design and utilities that are distinctive and vibrant.
This modern kitchen is sleek and smooth with flawless design and beauty. Minimalism doesn’t stop this kitchen standing out. Featured walls of wood and vibrant mint green draw the eye, whilst the white surfaces reflect the light, illuminating every nook and cranny of this kitchen. This kitchen features products from Rotpunkt, innovators of modern kitchen design. Made with German engineering, a Rotpunkt Kitchen is the ultimate modern addition to your home. Rotpunkt Kitchens have timeless design and amazing functionality, they work for every purpose and are eco-friendly. Sourced from natural materials, a Rotpunkt kitchen uses 37% less timber, conserving natural forests and being more environmentally conscious.
Prefer a homely and traditional feel? Classic kitchens are warm, welcoming and filled with wood. Wood flooring, wood fixtures, wood furniture – you name it! You can bring a rustic feel to your urban home with a classic kitchen. Subtle colours and beautiful finishes, Classic kitchens are for taking it back to the basics with a definitive look and feel.
With stated handles for cupboards, Classic kitchens are effortlessly timeless. They convey an elegant but relaxing nature. Giving off countryside vibes, natural elements convey a British countryside feel. The wood featured in a classic kitchen can range between oaks and walnut, creating a warmth and original feel to your home. Soft English heritage colours add a certain mood to your home, softening the light making it cosier.
Any kitchen planner will tell you that the meeting point between traditional and modern design, is a Shaker kitchen. They have a distinctive style and innovative feel. Shakers are fresh, mixing different colour tones with stylish wood and vinyl. The most important feature of a Shaker kitchen is functionality – every feature needs to serve a purpose in the kitchen. Paired with stylish and unique furniture, a Shaker kitchen is an ideal addition to any home.
The ultimate marriage between Classic and Modern kitchens, this Shaker kitchen has deep colour tones with copper emphasis features. All the fittings and fixtures blur the line of modern and tradition, with a Classic look but modern colour vibe. Unique furniture and design make Shaker Kitchens perfect for the middle ground in kitchen design. Minimal but beautifully dressed. Traditional but bold and modern at the same time. Storage solutions are part of the functionality of Shaker kitchens, but don’t detour from conveying yours as a luxury kitchen.
Whatever you choose for your new kitchen, be it Modern, Classic or Shaker – pick whatever suits you. Taste is, and always will be, subjective – it’s down to you.
Ways Green Preppers Are Trying to Protect their Privacy
Environmental activists are not given the admiration that they deserve. A recent poll by Gallup found that a whopping 32% of Americans still doubt the existence of global warming. The government’s attitude is even worse.
Many global warming activists and green preppers have raised the alarm bell on climate change over the past few years. Government officials have taken notice and begun tracking their activity online. Even former National Guard officers have admitted that green preppers and climate activists are being targeted for terrorist watchlists.
Of course, the extent of their surveillance depends on the context of activism. People that make benign claims about climate change are unlikely to end up on a watchlist, although it is possible if they make allusions to their disdain of the government. However, even the most pacifistic and well intentioned environmental activists may unwittingly trigger some algorithm and be on the wrong side of a criminal investigation.
How could something like this happen? Here are some possibilities:
- They could share a post on social media from a climate extremist group or another individual on the climate watchlist.
- They could overly politicize their social media content, such as being highly critical of the president.
- They could use figures of speech that may be misinterpreted as threats.
- They might praise the goals of a climate change extremist organization that as previously resorted to violence, even if they don’t condone the actual means.
Preppers and environmental activists must do everything in their power to protect their privacy. Failing to do so could cost them their reputation, future career opportunities or even their freedom. Here are some ways that they are contacting themselves.
Living Off the Grid and Only Venturing to Civilization for Online Use
The more digital footprints you leave behind, the greater attention you draw. People that hold controversial views on environmentalism or doomsday prepping must minimize their digital paper trail.
Living off the grid is probably the best way to protect your privacy. You can make occasional trips to town to use the Wi-Fi and stock up on supplies.
Know the Surveillance Policies of Public Wi-Fi Providers
Using Wi-Fi away from your home can be a good way to protect your privacy.However, choosing the right public Wi-Fi providers is going to be very important.
Keep in mind that some corporate coffee shops such a Starbucks can store tapes for up to 60 days. Mom and pop businesses don’t have the technology nor the interest to store them that long. They generally store tips for only 24 hours and delete them afterwards. This gives you a good window of opportunity to post your thoughts on climate change without being detected.
Always use a VPN with a No Logging Policy
Using a VPN is one of the best ways to protect your online privacy. However, some of these providers do a much better job than others. What is a VPN and what should you look for when choosing one? Here are some things to look for when making a selection:
- Make sure they are based in a country that has strict laws on protecting user privacy. VPNs that are based out of Switzerland, Panama for the British Virgin Islands are always good bets.
- Look for VPN that has a strict no logging policy. Some VPNs will actually track the websites that you visit, which almost entirely defeats the purpose. Most obviously much better than this, but many also track Your connections and logging data. You want to use a VPN that doesn’t keep any logs at all.
- Try to choose a VPN that has an Internet kill switch. This means that all content will stop serving if your VPN connection drops, which prevents your personal data from leaking out of the VPN tunnel.
You will be much safer if you use a high-quality VPN consistently, especially if you have controversial views on climate related issues or doomsday prepping.