Investments in UK Companies With 30% Tax Relief – Use VCTs

Venture Capital Trusts or VCTs offer investors a means of investing in smaller UK companies, while enjoying tax relief of 30% paid up-front by government.

VCT investments must be between £3,000 – £200,000, and the shares must be held for 5 years, in order to retain the tax relief.

If for any reason Venture Capital Trust investments are terminated before the end of the 5-year period, the 30% in tax relief must be paid back to HMRC.

There are now very innovative VCT models available which have very effectively minimised risk. As the top tax bracket has now risen to 50%, VCTs are a more attractive investment than ever, particularly for high earners.

VCTs – the Tax Breaks

The 30% tax relief available on VCTs is based on the investor’s income tax liability in the year of investment. In other words, investors can only claim against the income tax they have paid in the current year.

For example, the 30% tax relief on a VCT investment of £100,000 would be equal to £30,000. However, this would be available only if the individual had paid £30,000 in tax during the current tax year.

The relief can be used against all forms of income tax paid, not just earned income, and all dividends are tax free. Any capital gains on shares sold in the VCT are also tax free.

Market conditions are extremely favourable to VCT investments at present.

With bank lending to smaller companies relatively difficult to obtain at present (January 2011), many dynamic companies are looking around for alternative sources of finance – and see VCTs as an attractive option.

Consequently, VCT managers have never had such a range of high quality projects vying for funding, and the quality and standard of companies where they invest has never been so good.

VCTs are a valuable and highly tax-efficient strategic investment which can be used as part of a balanced financial plan, in conjunction with Individual Savings Accounts (ISAs) and a personal pension.

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Working With the Best Life Insurance Agent, Or Have You Any Idea What You Just Purchased?

This life insurance article is not to explain the different life insurance products which are available in the market place, but rather, its purpose is to explain the importance of finding an honest, professional life insurance agent you can trust.

After 33 years in the insurance industry, I have met life insurance agents with the very highest of ethics. I would trust these people with my grandson’s life, a life that means more to me than my own. These wonderful individuals are not necessarily the elite money makers of the insurance industry, each is simply the type of person who lives by the “Golden Rule”.

When speaking to someone younger, these professional agents speak, as if, they were speaking to their own child. The client’s interest is more important than how much money will be made from the sale. Often, these professionals could have retired years ago. They choose, however, to continue to help others work their way through a product that by its very nature forces people to think about a subject which no one really wants to discuss.

These are the insurance agents that will not simply sell you a life insurance policy because you need life insurance, but rather, these individuals will discuss all of your needs. They will suggest you purchase a term insurance policy and disability insurance, rather than suggesting you just buy whole life and never mention disability coverage.

On the other hand, I have met the scum of the earth. While they are few and far between, here are some examples of the way the unscrupulous agent will speak.

When being trained to sell an “accident only” income policy, I learned some agents would use the following technique.

Question: “Will this policy pay me an income if I am sick or hurt?”
Agent’s Reply: “Yes. This policy covers you for any accident 24 hours a day!”

I am certain you caught the lie. Most people stopped listening after the word “yes” which, of course, is a lie.

Another example of the unscrupulous agent is the person selling “mortgage insurance” which when asked “Is this life insurance?” replies “No”. They state that mortgage insurance is for the mortgage only. This out and out lie is used by an agent simply looking for a quick sale. They are not willing to work with a client over the course of a few meetings. I was told by my boss to use this technique after not making a sale at 3 consecutive appointments. I, of course, quit that day.

At your first meeting, interview the insurance agent while the insurance agent interviews you. A professional will ask specific questions to learn about your needs and desires in life. Then, after the first meeting, if you request the agent return with some proposals for your consideration, he / she will do so. If you are not comfortable with the agent, simply state your concerns. Do not waste the agent’s time as he is not paid a salary. Your honesty will be appreciated.

The last example I offer regards a widow which I recently met. This woman purchased a “Variable Universal Life insurance Policy”. This sophisticated product requires the agent hold an additional license just to be able to sell it. The product was purchased at her bank.

The woman’s understanding of the policy was that upon making a 1 time premium deposit, she would always have life insurance no matter what happened to the cash value of the life insurance policy. The cash value could be placed into any of the sophisticated vehicles offered to her by the insurance company. A high risk mutual fund is an example of where she could place her money.

Now, this may not be the work of an unscrupulous agent. It may simply have been a costly misunderstanding. The truth about these policies is that if there is not enough cash value within the policy to pay for the cost of insurance, the insurance ceases! If you invest $100,000 into this type of product and the cash value is now $20,000 and the cost of insurance is $5000 a year because you are age 75, your insurance will not continue unless you die before the cash value is gone, pay additional premiums or enjoy a drastic change in the investments.

In summation, work only with professionals, ask for references, and do not sign the application until you have no doubt you are making the right choice because all of your questions have been answered.

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100% Mortgage Financing With A Lowly “500” Credit Score?

The financing vehicles have been in place for several years now for a borrower using some creativity with a seller to make 100% financing possible. However, the real estate market had been so hot in many areas in the U.S. the sellers did not have to even entertain anything resembling creative financing. With a softening market, creative financing is back as a helpful tool to allow sellers to unload their properties as long as an over supply of inventory exists.

Harold and Laura had been renting a home in a suburban area for three years. They had been digging out from under a heavy debt load of medical collections. Laura was leaving work one day and a truck had crossed the line and pinned her in her small car for a half an hour until the jaws-of-life was used to extract her out from her crushed vehicle. With a broken hip, ankle, eye socket and fibula a long recovery ensured and Laura was not able to work for two years. The other driver was at fault, but any financial recovery was years down the road as the other insurance company was playing hardball.

In the meantime, with constant harassment for the out standing medical bills and the weight of credit card and installment debt that existed prior to the accident was just overwhelming. Harold had been working two jobs just to meet the basic family needs. Family help was limited and really wasn’t expected. Laura’s therapy had been going on for a year now and real progress was being made. Her employer had kept her job open as a customer service representative ironically at a credit card service center. The benefits were limited and very little of the medical bills and rehab had been covered. Harold and Laura had been seeking some financial advice from a local bankruptcy attorney. It was decided that with their level of income and huge medical bills that filing a Chapter 7 Bankruptcy action might be the best thing to do for mental sanity and cash flow. A Chapter 13-payback plan would be crippling for many years to come.

As the bankruptcy attorney explained to Harold and Laura that in his practice example after example comes before him where just bad things happen to good people and that there was no shame in taking care of their financial affairs in this manner. The rationalization process followed.

Two months before filing the bankruptcy, the insurance company was offering a small settlement based on an allegation that Laura may have temporarily been distracted by talking on her cell phone and thus reduced her reaction time. Rather than put up a long protracted fight Harold and Laura, for better or worse settled for an amount that just covered her payoff on her totaled car. They were relieved of that installment. Their attorney for the accident urged them not to settle, but with Laura’s eminent recovery and the stress of the whole ordeal, they grabbed what they could at the time.

Harold and Laura received their notice of the Final Discharge of their Chapter 7 Bankruptcy. All the collections for medical bills, non-secured credit cards and one major medical bill that had resulted in a judgement being awarded for the first responding hospital had all been wiped out. They excluded their family car from the Bankruptcy matrix (which names all the debtors), which still had a $6,850 balance with a $295/month payment remaining.

They also excluded a credit card that they had for years and had a low balance and a low monthly payment. This allowed Harold and Laura to maintain two trade lines and their on time rental payment of some $1,250/month outside the Bankruptcy action. Laura had now been back to work at her old job for two weeks. She was fortunate to take advantage of a car pool with a fellow worker who lived a half mile away.

It was like the world had been lifted off their shoulders. Now Harold and Laura had their rent, one car payment and a small credit card and their home utilities. The cell phone service had gone by the way side many months before.

Even through the most brutal times and the lowest of the low, Harold and Laura, as their custom, visited Open Houses after church every Sunday. It was always in the neighborhood and never more than two home visitations. It was Harold and Laura’s way to cope with the dark cloud that had beset them. During this process, they became familiar with a local Realtor who took a very personal interest in their situation. The Realtor, named Betty, knew they were not ready to do anything until some things had been handled.

At the most recent Open House visit, Harold and Laura shared that they had put their financial challenges behind them. Laura was feeling great and off all her pain medication. Betty raised the prospect and questioned them if she could figure out a way to get them into a home at a little more than they were paying in rent with little or no money out of pocket, would they have an interest at least in hearing more about it. Harold raised his hands with palms up and a shrug of the shoulders, and shared that it wouldn’t hurt to listen to some possibilities. The accident had caused a detour in the quest to own a home, but it had not killed their dream.

Betty set up a meeting with the Realtor’s in-house mortgage broker to discuss their options. A joint credit report was pulled and as Harold at the time made the most money his middle score was utilized to qualify for a mortgage. His middle credit score was right at 500. The mortgage broker went on to explain that they would qualify for an 85% Loan To Value mortgage. Due to their lack of a cash down payment, it was added, that the only way that they could use this loan option would be with a seller held second of 15% loan to value with the seller also paying up to 6% of the contract selling price.

This would then give them a 100% Combined Loan To Value (CLTV). The loan would need to be a Fully Documented loan with verification for employment and income. The mortgage broker felt like he could present Laura’s employment gap due to the accident and use her current income for qualifying purposes. Totaling up the income versus the debts, it was determined that Harold and Laura could buy a home in the $175,000 range IF the seller would offer reasonable terms on the 2nd mortgage. Betty piped in that she had been sitting on a listing for six months and the owner now may have an interest in holding some paper versus renting the property again and deal with the tenant challenges on repairs and upkeep. The home was close to their current residence.

Betty was able to work out the deal with reasonable terms on the second mortgage that would keep the overall monthly payment down at least for the first three years. As the mortgage broker explained, that should be plenty of time to establish a better credit history and qualify for a lower interest rate loan in two years. As an added bonus, the seller agreed to pay all the closing costs and prepaid expenses such as annual hazard insurance and tax escrows plus replacing a leaky roof. Harold and Laura moved into their newly purchased home putting all the travails of the past in the rear view mirror.

Sometimes bad things happen to good people. In this current real estate market, there are creative possibilities. It won’t last forever; the time is at hand for seller help and creative financing.

Dale Rogers

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The New Role of the CIO – Business Transformation Partner

It is becoming increasingly necessary for Industries and Organizations to improve Productivity, Reliability and keep pace with the ever increasing demands. Never before has there been such a pressure on Business-the Production and Engineering departments to keep up to these demands.

Business has no other choice but to identify “issues”, adapt “new technologies”, de-bottleneck and implement Engineering/Process IT Innovation drives wherever practical and possible.

Information Technology is not the business, it is an enabler. By enabling the business, the IT strategy, architecture and projects should be dictated by the larger Organization business strategy, architecture and programs. However, we often see a Disconnect between the IT and Business Strategy.

The IT strategy

The CIO or the Chief Information Officer can play the role of a partner and assist the Business team achieve their objectives.

IT is perceived as not providing value to the organization. Why is this?

Typically the CIO and the IT team’s role have been restricted to Implementation, ‘Support’ & ‘Maintenance‘ of Enterprise needs related to IT hardware and Software.

IT teams have in the past procured specific software and hardware, have got tied down by the lock in periods, typically three to four and have eventually got trapped with the obsolete software down the line.

The advent of the Cloud, Platform as a Service, Infrastructure as a Service & Software as a Service has provided the CIO with new possibilities.

Technology trends and landscapes are much more dynamic now and there is an increasing need for CIO’s to look at getting out of the ‘traditional support‘ mode and get more focused on meeting the ever increasing demands from Business.

The Organization now increasingly looks at the CIO for critical support to the Business teams, without which no Transformations would be possible.

A Proactive CIO is the one that sees the cue and takes the lead in these transformational initiatives that can make a big difference to the way the Organization performs.

Most CIO’s of Organizations report to the CFO, I am not sure if this is the right structure. However a smart CIO can take advantage of this structure and ensure that they have the blessings of the CFO to allocate good Budgets to IT and Process and Engineering IT initiatives.

Having said that in today’s recessionary times, these Budget allocations are not easy. A lot is expected to be achieved with a reduced budget and in least time.

Also several IT initiatives related to Business improvements in the past have not been successful, mainly because the CIO and the IT teams has never been considered as a reliable partner to implement and be responsible for such Initiatives and its Implementation.

How can the CIO and his team become a trusted Business partner and how do they first ensure these Budget allocations? How would they get the Management Support and backing?

-A Business Transformation programme

The first phase would necessitate the hiring of a Business Process Improvement Consultant who would on a fast track, identify issues across the Business units, recommend Areas of Improvement.

{We will not get into details here about the way the programme is to be managed}

The Consultant should ideally be asked to recommend a short list of areas of improvement, those which can provide the Organization with the maximum Impact.

-An Innovation drive

There is no point in diluting the efforts of Innovation by identifying far too many areas for innovation and improvement as mentioned earlier.

This should be Targeted and only those Innovations that can meet the new Business needs and challenges must be taken up.

The following would be KEY to the success of these IT Innovation drives.

-Branding Campaign

A precursor to the Innovation project should be a well designed and branded campaign.

This campaigns only objective is to sell this idea within the Business and to ensure that the entire Business team realizes the value of this programme and the Business Outcomes that it is designed to achieve

-THe Right Technology

Identify a tested and proven Technology. It’s a good idea to make site visits to organizations that have implemented these Technologies successfully and get a good feedback

-The Right Leader & Right team

The leader should ideally be CIO who shares the Business & the Organization’s vision. He should be assisted by a Business Leader. The need for small focused teams comprising Leads from IT and Business is absolutely necessary. The right leader needs to assist and lead the team and justify to the Core team, the need for these innovation drives and the resultant Business Outcomes.

-Right Partner to Implement

Identification of the Right partner to implement is another Key need and ideally the selected product or the technology OE is the right agency to recommend the partner.

-The Right Methodology, Framework

It’s very important to ensure the right methodology which ensures consistent internal stakeholder support. How do we manage this?

The idea is to break up these projects in phases and into small projects rather than go with a Big bang approach.

Create small POC’s, demonstrate small success stories.

The best way to show proof of success of typical process Automation or other IT Innovation drives is to get the ‘Business users’ to see and measure success-the best way is to implement a POC, develop a small self service portal, where they are able to key in specific data and see tangible benefits.

Unless the Business Users ‘do not perceive‘ this as an Experiment and a Risk, the project will not meet its objectives.

If this is achieved, not only the Roll Outs of the project is guaranteed but also in the least time and well within the reduced Budgets.

Lessons Learnt

The CIO must make these success stories visible to his Organization at the right times during the project progress. The objective must be to ensure that the rest of the Organization and key stake holders are confident about the success and supports him and the Business teams.

Change is always resisted; people get complacent and comfortable doing things the old way. It’s important for them to experience the Changes Innovation brings and how it lets them achieve their Objectives better and more efficiently.

Smart CIO’s are the ones that are looking to ’outsource’ routine and Typical Support and gearing up to meet the new Business Challenges.

The role of the new age CIO is to lead from the front and move from typical “Supporting” the Business to ”Contributing” to Business through a string of IT and Engineering/Process IT Innovation drives that transforms the Business.

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