The Catalyst sports fund is another novel business opportunity from the specialist investment firm – niche marketers of small company investment opportunities, particularly using the Government tax breaks of the enterprise investment scheme.
The idea is to raise £600,000 to support sportspeople at the start of their careers when they need the money to focus full-time. In return for a fixed income for, say, three years, the fund benefits from their earnings. Selection of talent will clearly be the key factor. Catalyst has joined with a promoter who it says has the contacts to gain access to tomorrow's winners.
It is a nice idea but be warned. Although we do not yet have the details, like all start-ups, it will be risky. Minimum investment is £15,000 so it is aimed at the wealthier investor and so it should be.
Catalyst hopes to kickstart the business with money from people who have invested with the firm before. But thereafter it is probably not the best investment for smaller retail investors looking to preserve their cash.
As a reminder, EIS qualification means you get 20 per cent of your investment off your income tax bill – capital gains in the business are tax-free and if you are lucky enough to have capital gains now (or up to three years before investing), you can defer paying the tax until you leave the scheme.
If you can afford to lose your money, then take a careful look. By the way, EIS rules may limit your loss to about half, even if the company goes bust. People looking for the EIS tax breaks, though, rather than the gamble should look elsewhere – possibly with Catalyst.
David Knight is director of Tax Shelter Research