BES - Relief for PAYE Tax Payer

Never invested in a BES before, but looking at one at the moment.

If for example I invest 30k, how and when is the relief administered ? Do I get tax credits in the year of investment, or is it something I claim back at year end ?

Thanks

Niallymac said:

Never invested in a BES before, but looking at one at the moment.

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Before you worry too much about the mechanics of the transaction, are you sure it's the correct investment for you.

You are putting your investment into a single company. It is a start up company so has no track record and little penetration into the market it's aiming at. The track record for start up companies isn't that healthy, worth looking up the stats if you can find them online. The stats for the BES companies also isn't that healthy, again, have an idea of just how many of the companies crash and burn.

The upside, you get great tax breaks and if the company does well......

Do plenty of homework before investing.


(open to correction on all figures)
You've already paid the tax on the money, so my view would have been you provide a certain amount, the goverment pays the tax which would originally have been paid.
I.e. you want to invest X, the gov tops this up with the original tax which you paid on X so your investment is 0.52X + the gov's contribution of 0.48X.

Never dealt with the BES system so very open to being corrected here.

The last time I made a BES investment, this was what happened:

- paid cheque to BES company for full amount - in your case 30K
- received BES documentation from company stating that I had invested 30K
- made tax return to the revenue at year end
- received tax refund from the revenue

BES investments are high risk investments in small startups which may be suitable for some investors but not necessarily for those who don't already hold a well rounded portfolio diversified by risk/reward profile, asset class, investment timeframe etc. If you don't already hold such a portfolio then you should seriously question the relevant of BES to your own situation.

Thanks for the replies. I understand the risk profile well. My portfolio is top heavy with low risk at moment, so it gives it a bit more balance with the tax kicker as the bonus.

Just latching on to this one guys because I'm interested in the Davy BDO 2006 BES fund. Lets say I kick in 5k. Does this mean that I would get a refund of 1k based on the fact that I only pay tax at 20%? Does it matter what tax I pay during the year?

While we are on the Davy BDO fund has anyone invested?

Have you considered the fact that BES investments (direct or indirect) are usually very high risk so whatever about getting €1K back the chances of losing your original €5K are probably high?

Fair enough but I should hope that BDO / Davy's are not in the business of trying to lose investors their money. Its a risk but I have my eyes open on this one

No - but BES investments are normally at the extreme end of the risk/reward spectrum and, as I understand it something like 80% or more of startups fail in which case investors will lose their money. I don't see any particular fund manager mitigating these risks to any great extent.

Agree with Clubman. Friend a few years back put 30 into this fund and got back 5, so be aware of risk.

Leaving the risk aspect aside. If I invest say €50k. as a BES investment and my marginal rate is 42% do I get a refund of €21k. (42% of €50k.) or is the refund amount limited to the amount of PAYE I have paid in that tax year??

mickeyg said:

Leaving the risk aspect aside. If I invest say €50k. as a BES investment and my marginal rate is 42% do I get a refund of €21k. (42% of €50k.) or is the refund amount limited to the amount of PAYE I have paid in that tax year??

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Its limited to the amount of tax paid.