Tax Breaks for small business investors

[tricky69]

i am thinking of investing a small amount of money in a comany a friend has started.. nothing much at all something like 10k, and am happy to forget about it and right it off.

What i want to know is are there any tax breaks should the unthinkable happen and the company go under ?

I have never done anything like this before so any advice/help would be appreciated - thanks

[Eric Mc]

Not many.

If you have borrowed to invest, you can claim tax relief on the interest.

If the business is SUCCESSFUL and it is eventually sold, you should be able to vavail of entrepeneurial relief for Capital Gains Tax purposes.

If the busimness is sold off at a loss, you might be able to obtain loss relief against other non-related Capital Gains in the same tax year.

How do you expect to receive your share of the business' success?

[tricky69]

Eric Mc said:

How do you expect to receive your share of the business' success?

well plan was to draw up a contract with him and lawyers to either 'own' a % of the business for my investment or to be paid a dividend every year and then have the full amount paid back in one lump sum in say 5 years..

guess the second way is safer as i will have an income as the busniess goes along as long as it is successful...

however if the business is a success and i own a % i can get a payment every year anyway right ? like the same % of what the owners paythemselves for example ?

[Eric Mc]

If you own a percentage of the business (which I presume it is a limited company), then you would need to buy some shares in the company. It's the ownership of those shares which entitles you to your dividends. The company can only pay dividends when it has sufficient reserves (i.e. profits) out of which it can pay the divdends.

Edited by Eric Mc on Tuesday 26th January 11:49