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Investment returns will be paid to shareholders in the form of a dividend at the end of the investment term. Our typical target investment term is 18-36 months from the date funds are raised to the date the project completes and all units are sold. These timeframes are of course informed estimates and should not be relied upon.
Whilst all investors should seek independent tax advice, we have provided an overview of some personal and corporation tax implications for investors resident and domiciled in the UK. This information is not advice, should not be relied upon and may be subject to change in future.
Personal tax (income)
Our SPV’s will make distributions to shareholders in the form of a dividend. We are not required to deduct tax on your behalf, but you may be liable to pay personal tax on receipt of dividends. We will provide you with an annual statement of earnings to allow you to determine your return from Homegrown investments in any tax year.
From April 2016 a £5,000 tax-free dividend allowance was introduced for all UK taxpayers. This means that Homegrown investors will pay no tax on the dividends they receive where their total dividend income is less than £5,000 in any tax year. Income tax may be payable on any dividends in excess of £5,000. The tax-free dividend allowance will be reduced to £2,000 from April 2018.
Personal tax (capital)
You may be liable to pay capital gains tax in a scenario where you sell your shares in an SPV for a profit before the end of an investment term. However, all taxpayers are entitled to an annual exemption on capital gains of £11,100 (2015/16 tax year) and therefore capital gains below this amount in any tax year will not be taxable. Any gains above £11,100 may be subject to tax.
The corporation tax position will vary for each project depending on the investment structure and you should review each investment listing for details.
Please note that the corporation tax rate for small companies in the UK is expected to fall to 19% for years commencing 1 April 2017, 2018 and 2019 and 17% at the 1 April 2020.
Please note: Tax laws are subject to change and every individual’s circumstances and therefore tax position is different. We are not qualified to provide tax advice and no information in this response should be interpreted as the provision of tax advice. Please seek independent, expert advice to ensure you are meeting your tax liabilities.
We charge two fees:
5% Deal Origination Fee - A one-off charge on funds successfully raised for each investment listed on the platform; and
15% Profit share - A share of net SPV profits.
Our fee structure is designed to be straightforward, transparent, fair and ensure that our interests and motivations are completely aligned with yours.
If a project goes over budget due to mistakes made by the developer, then the developer will typically be required to meet the additional costs themselves, without affecting the agreement with the investors or the projected return. However we are very selective over the developers we work with and our projects are always structured so that it is in everyone's best interest to mitigate risks.
However, there are risks associated with investing in property and private limited companies which are outside of the developers' control and we encourage all members to read our full risk warning before making an investment through Homegrown.
Please feel free to contact us if you have any questions about the risks associated with investing with Homegrown.
The profit share varies for each development, but will be clearly set out on each investment listing. A typical profit share arrangment will be 50:50 between the investors and the developer.