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Tax (Reporting & relief)

  • Updated

Disclaimer: This is not tax advice. Please seek independent tax advice.

The tax-related information provided here and anywhere else on Odin’s website is for informational purposes only and should not be considered as tax advice. We recommend consulting a qualified tax advisor to understand how the topics discussed may apply to your specific situation.

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EIS and SEIS

(You can find a guide to the end-to-end S/EIS process here)

The Enterprise Investment Scheme and Seed Enterprise Investment Scheme are UK government schemes which incentivise investment into UK companies via tax relief on both the initial investment and capital gains related to the investment. Claims can either be submitted for the current tax year, or backdated into a previous tax year (up to a certain limit). You can read more here about how the schemes work, what sorts of companies qualify and the level of relief available.

If you’ve specified a deal as being eligible for EIS, SEIS, or both, and the investee company has provided Odin with Advanced Assurance of this during the deal review process, investors should be able to claim relief via the relevant scheme once the company has completed the relevant paperwork and shared documents with us after the deal has closed.

If you are making use of Odin’s rolling close facility, please note that you won’t be able to access the information needed for S/EIS submissions until the deal has fully closed on Odin.

If your syndicate investors have questions, please refer them to the Investor Guide, where we elaborate on the process from their perspective. The following two points are the most common queries we see:

Where is my S/EIS certificate?

Odin is dependent on how soon the investee company can obtain the S/EIS UIR in order for the S/EIS3 certificates to be generated.

If Odin is handling the S/EIS3 certificates we will do so as quickly as possible. However, we have no control over how quickly the investee company obtains and forwards the relevant documents, so would advise the investor to defer to you for an update.

The tax year is approaching and I’m worried I can’t submit my claim in time

If it’s unlikely that the certificates will be generated and distributed to investors before the tax year end deadline, please advise your investors that their relief claim can typically be backdated into a previous tax year. If they have further concerns, we recommend that they seek independent tax advice.

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US Investor Reporting (PFIC/FATCA)

All Odin Bare Trust SPV entities are considered Passive Foreign Investment Companies (PFICs) under the Foreign Account Tax Compliance Act (FATCA). FATCA requires Foreign Financial Institutions to report information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, directly to the Internal Revenue Service (IRS).

Odin’s US advisors, Bennett Thrasher, have provided guidance on the additional documentation required and process US investors must follow so that there are no negative tax implications for investing via an FIC. As such, Odin can accept funds from US investors without issues. Please note, however, that Odin does not provide tax advice, and if you or your investors have any concerns we’d recommend speaking to qualified accountants and enquiring independently about PFIC taxation.

US investors are either investors who have provided Odin with a registered address in the US during their account setup, or investors who have otherwise informed Odin of their US taxpayer status. This includes dual tax residence.

Please note that form K1 is not applicable to PFICs, and Odin does not support with Blue Sky filings, state by state tax requirements or similar processes for our UK bare trust structures.

Odin’s process for ensuring tax compliance for US investors is as follows:

  • Once per year, in the run-up to the end of March (typically by the end of January to allow investors sufficient time to handle filings), Odin provides PFIC documentation to U.S. investors. Investors can use this information in an exit event to make a Qualified Electing Fund (QEF) special election and report annual earnings under the QEF regime (instead of being subject to the Excess Distribution Regime, which incurs additional taxation). This ensures no additional tax liability on their investments held via Odin vehicles.
  • US investors have additional reporting requirements regarding their investment in a PFIC as part of the QEF election. The guidance we have received is that US investors must file Form 8621.
  • Additionally, if the value of an investor’s investments is greater than $50k, (or greater than $100k if they are married and file jointly with their spouse), they will likely also have to submit Form 8938. You can find more guidance here.
  • Those investors required to file Form 8938 must do so annually as part of their personal tax returns. Since the PFIC has no income in Odin's case (no dividends are paid), investors may choose only to file form 8621 once an exit event occurs, in order to make a QEF election on the capital gain. However, we advise investors to take independent tax advice on this matter.
  • Odin provides the information needed for all of these filings, but don’t handle the form completion for the user. They need to fill out the forms themselves with the data we provide.

Odin does not charge your US investors any ongoing fees for any of this.

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Ireland: EIIS

We can offer some support on Ireland’s EIIS scheme, which works in a similar way to the UK S/EIS scheme.

Irish investors can claim EIIS on investment in Irish companies, even if these happen via a UK bare trust. We have received advice on this from BDO Ireland.

For further information, reach out to our support team on hello@joinodin.com.

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Tax transparency and tax liabilities

Because Odin typically uses a United Kingdom Bare Trust structure to administer investments, there is complete tax transparency. This means that in practice, there are no geographic restrictions around where investors can invest from, or the companies they can invest into. All the structures we offer are completely tax transparent unless otherwise stated, and do not generally create tax liability in the jurisdiction where the entity is domiciled. However, as always, we cannot offer tax advice and recommend that you seek this independently.

However, typically your investors will be liable to pay tax wherever they were tax resident upon a liquidity event. Investors do not have tax liability in the UK.

For any non-UK government-sponsored tax relief scheme operated in the investor’s home country, if investors need to process a claim for tax relief based on these schemes, Odin’s advice is to seek advice from a qualified accountant in the country they’re claiming the relief in.

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How tax works on carried interest

We advise investors to seek independent tax advice with respect to the local tax treatment of their investments on the Odin platform. The below is not tax advice and cannot be used as such - it is for informational purposes only.

We have received guidance indicating that UK investors are likely to be liable for income tax on carried interest. This is because Odin Bare Trust SPVs are not collective investment schemes, are not regulated Alternative Investment Fund Management (AIFM) structures, and as such do not benefit from the carve outs of Disguised Investment Management Fees (DIMF) rules mentioned below.

However, if structures are run as AIFMs, carried interest returns in the UK may benefit from different treatments. Effectively, sums allocated to an individual by way of carried interested can be treated, for tax purposes, as if the recipient had personally carried out the underlying transaction that gave rise to the income. The carried interest Income Tax rules provide, broadly, that any sum of carried interest arising from a fund is eligible for capital gains tax treatment only if the investment vehicle holds investments, on average, for at least 40 months. Partial CGT treatment is available where the average holding period is between 36-40 months. Where the average holding period is below three years, all sums of carried interest arising to the individual, however structured, are charged to tax and NICs as trading profits.

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