Saving tax, the environment, and the economy!
Traditionally in the UK, one of the biggest aids to starting or growing a business is to own your own house. That’s because in our upside-down economy, you can borrow money on much more favourable terms for an unproductive mortgage than to invest in productive business. So you would use that to finance your startup, or be at a disadvantage.
With house prices crashing and mortgage lending turned suddenly more cautious, that’s no longer the case. Indeed, if you want to finance a business, you might (almost) just as well tell the bank manager the truth and present a business plan. Or maybe not the bank manager at all: there are other sources of funding. With unfair competition from the banks taking a knock, suddenly there’s a whole new niche for venture capital and other such investors.
In the UK, that include Venture Capital Trusts (VCTs), which offer significant tax advantages to investors, in return for investing in unlisted smaller businesses. The tax breaks reflect the fact that they’re traditionally higher-risk than big PLCs, and that they have low liquidity. But a VCT, like a unit trust, serves to spread the risk. I decided some time ago to invest some money in VCTs, towards the end of the tax year.
For those of us who care about “green” issues, a VCT that stands out is Foresight, which specialises in environmental businesses. I just wrote the cheque to subscribe to their current offer. That’s three boxes ticked: save tax, save the environment, help small business. And hopefully a fourth: make good money for me.
I expect I shall subscribe to one more VCT within the current tax year, but I have yet to decide which amongst those with current offers open.
 Fractional reserve banking – the bank lends money that doesn’t actually exist, on the premise that it comes into existence as repayments are made. Works until bad money drives out good and it becomes a pyramid.