A shadow of its former self: Neasa MacErlean looks at the options for Business Expansion Schemes following the Chancellor's moves in the Budget
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Your support makes all the difference.POTENTIAL investors have one more week to subscribe to a Business Expansion Scheme in order to get the benefit of tax relief for the current fiscal year.
But the BES market is a shadow of what it was two weeks ago before the Chancellor, Norman Lamont, abolished the popular 'loan-back' facility. Gone are the huge building society BES plans that could guarantee fixed returns before the end of the five-year investment period.
The BES market is no longer the province of the investor who wants to make a quick and guaranteed buck. It is now more the investment home of the romantic investor - the supporter of the British film industry, for example, or Essex University graduates with a sentimental attachment to towering blocks.
Some schemes are offering a guaranteed return after five years. The Royal Bank of Scotland is backing Lancaster University Residences II - a scheme that offers a return of pounds 1.18 for each pounds 1 gross invested now. Wivenhoe Park Residences - a scheme to raise pounds 5m for 230 low-rise student residences at Essex University - also has a contracted exit of pounds 1.18 per pounds 1 share.
Many of the schemes do not have a fixed exit price. Some are decidedly speculative. Two schemes - Media Productions and First Standards Media Two - are being launched to try to boost the British film industry. The latter already has BES experience: The Mystery of Edwin Drood, the product of First Standards Media One, will have its premiere (in front of The Princess Royal) at the end of next month. It hopes to raise pounds 750,000 from its second BES.
Media Productions is hoping to raise a minimum of pounds 150,000. The company is in negotiations to acquire distribution rights to The Big Freeze, an Eric Sykes film starring Bob Hoskins and Spike Milligan.
Subscription lists for many of the now-open BES schemes will be finalised before the end of the tax year at the close of the day on Monday, 5 April. Some tax relief can be carried back on BES investments made between then and October. But it is limited to pounds 5,000 and must be matched by an equal investment eligible for tax relief in the next tax year.
A question mark hangs over two large bank-backed schemes after the Chancellor's move to bar loan-back schemes.
Investors in Homeshare, the pounds 25m BES scheme sponsored by National Westminster Bank and Hambros Bank, may be refunded because of uncertainty over whether their investment will qualify for tax relief. There is uncertainty over whether the scheme will qualify and NatWest is seeking further clarification from Inland Revenue. Barclays is also seeking clarification from the Revenue over its Gracechurch BES.
(Photograph omitted)
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