Property adviser Sapphire Capital Partners has launched a new Enterprise Investment Scheme (EIS), Sapphire Building Services Limited, which will allow investors to take advantage of Sapphire’s expertise in the UK construction industry.
The new company will conduct construction projects in the UK working on behalf of a variety of clients, undertaking construction with subcontractors and delivering the completed project for a contract payment. Investor returns will be derived predominantly through a realisation of profits from these projects.
The company received HMRC EIS advance assurance on the 31 January 2013. Owing to its generous EIS tax reliefs and benefits, the company may be attractive to qualifying high net worth clients of accountants, intermediaries and solicitors.
The closing date for investment in the Sapphire Building Services Limited EIS is 30 June 2013 and the minimum investment is GBP25,000 per investor. The maximum total subscription for the EIS is GBP1.5m and each GBP1 invested will receive one share at a nominal value of GBP1.
The directors of the company are seeking to achieve strong financial returns for investors targeting a minimum return of GBP1.05 for each GBP1 invested before tax reliefs which would deliver an investor (net of tax) return of 10.7 per cent per annum. This equates to a gross tax equivalent return of 19.4 per cent per annum to a 45 per cent taxpayer.
The EIS offers a number of attractive tax incentives for investors including: 30 per cent upfront income tax relief on the amount subscribed; 100 per cent inheritance tax after two years; Capital Gains Tax deferral for the life of the investment; 100 per cent tax-free growth; the availability of Business Investment Relief for certain UK resident non-UK domiciled investors; and loss relief for any shares disposed of at a loss.
Boyd Carson, partner at Sapphire Capital Partners, says: “Undeniably the UK construction industry has suffered throughout this recessionary period and this has impacted on the smaller, niche construction companies operating in this sector. The smaller players are finding it difficult to tender and win the more lucrative projects because they have a weak capital base, they cannot access development funding from banks and they lack experienced management. We therefore believe there is a strong opportunity for the type of construction company we are launching today – one that is well-capitalised and managed and can enter the market and benefit from the opportunities that are now available. We have already carefully identified a number of construction projects to take forward, in particular the building of new residential homes.
“The directors of this company are highly experienced in the construction sector and between us we have completed approximately 500 to 600 projects. Our focus with Sapphire Building Services Limited will be on a number of smaller projects rather than just one large one given that this approach would increase the risk exposure of the company. We will operate on a ‘cost plus’ or fixed fee basis which will mean we have a competitive advantage over less well-financed companies. We are committed to ensuring the capital value of the investment is maintained and we will only operate fixed-price contacts with our third-party subcontractors in order to prevent any over-run of costs.
“For investors we are focused on generating an attractive risk/return plus they will be able to benefit from the tax incentives that come with the structure of the company, notably EIS Income Tax Relief and EIS CGT deferral. Our intention is to trade for a minimum of three years with investors able to realise their investment if they wish after this period. Investors will receive a 100 per cent tax-free gain on disposal of their shares if they are held for three years.”