Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Insights
Investing Capital
Michael Johnson
· 2 min read
· Updated on

An introductory guide to Business Property Relief (BPR)

Whilst not as widely known as tax efficient investing opportunities such as the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment (SEIS), Business Property Relief (BPR) has actually been around for over 40 years

Introduced by the UK government in 1976, the primary focus of BPR is to offer an effective means of protecting your estate from a potential Inheritance Tax (IHT) liability.

And we're delighted to have recently published our first guide on the topic - an introductory guide to Business Property Relief.

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What does BPR seek to achieve?

Aimed at business owners who, generally speaking, have owned a business for at least two years, BPR provides an appealing option to achieving IHT protection for your estate in a relatively short timescale.

Although this has traditionally been the case, BPR has in more recent years established itself as one of the ways to benefit from investing in early-stage companies, thus having a direct impact on the next generation of British businesses.

Who is BPR for?

If you're later in life with a large estate, BPR can be one of the best ways to achieve IHT exemption - and in the guide, we cover the four main reasons why this is the case:

  1. There is no upper limit to the level of investment you can make in BPR, meaning you can allocate as much of your estate as you wish to BPR (unlike investments into Venture Capital Trusts or the Enterprise Investment Scheme, for example).
  2. Some tax efficient options may require you to place your assets under the control of your will immediately. This isn't the case with BPR - you retain full control over them.
  3. After just two years your BPR investments achieve IHT exemption, which is considerably shorter than many other asset classes.
  4. You have a three year period to transfer a BPR investment into another (on the assumption you sell the first) and still be able to benefit from its full value in terms of IHT exemption.

How can you make a BPR investment?

If you're eligible to benefit from BPR, the guide covers the two ways in which you can make an investment:

  1. Investing in a managed BPR portfolio - using an investment manager, whilst incurring a charge, gives you access to expertise and advice to help ensure your investments are built around your needs and preferences.
  2. Investing directly in individual BPR-eligible companies - should you be an experienced investor, particularly with regard to equity investing, it is possible to make investments directly into BPR eligible companies. An attractive option as it doesn't incur the fees of a manager, it does require you to be fully confident in your approach to investing.

If Inheritance Tax (IHT) liability is on your radar, and you're a business owner, our free introductory guide to Business Property Relief (BPR) should be considered a must read.

An investor's guide to Business Property Relief - download your copy 
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