Tax (Reporting & Relief)
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 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 government schemes which incentivise investment into U.K. companies via tax relief. Claims can either be submitted for the current tax year, or backdated into a previous tax year.
If the Syndicate Lead has specified their deal into your company as being eligible for EIS, SEIS, or both, and your company has provided Odin with Advanced Assurance of this during the deal review process, the syndicate investors will be able to claim relief via the relevant scheme after the deal has closed on Odin.
If you are making use of Odin’s rolling close facility, please note that the Syndicate Lead won’t be able to access the information needed for S/EIS submissions until the deal has fully closed on Odin.
Please also remember to keep accurate records of the S/EIS application process, in case of any future audits. This includes copies of all forms, certificates and correspondence with HMRC. Odin will also keep records of S/EIS3 certificates if we generate and distribute them.
If your syndicate investors have questions, please refer them to the Syndicate Lead, or alternatively to Odin’s 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 your 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 your company obtains and distributes these, and would advise the investor defers to their Syndicate Lead.
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, the Syndicate Lead will advise their investors that their relief claim can be backdated into a previous tax year.
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US investors – US federal income tax treatment
This section is only relevant to investors who are “United States persons” for US federal income tax purposes. It is not tax advice and is not a comprehensive discussion of all consequences that may apply. You and your syndicate investors should always consult a qualified US tax adviser regarding their specific circumstances.
Who counts as a US investor?
For Odin’s purposes, a “US investor” is any investor who is, or may be, a US person for tax purposes. This typically includes:
investors who have provided Odin with a US residential address during account set-up;
investors who have completed verification with a US passport; or
investors who have otherwise informed Odin of their US nationality and/or US taxpayer status (including dual tax residence).
If you know that one of your syndicate investors has US tax liability but they have registered on Odin with a different passport or address, you must notify Odin that they are a US investor.
How Odin intends to treat the Bare Trust SPV for US tax purposes
Odin uses UK bare trust nominee structures to hold shares for syndicate investors. Odin intends to treat a US person’s investment via an Odin UK bare trust / nominee (a “Nominee Investment”) as a constructive partnership for US federal income tax purposes. On this basis, a US investor is treated as owning their proportionate share of the underlying assets held through the Odin nominee, and is required to include in their annual US federal income tax return their share of any dividend income, capital gains, capital losses or other relevant tax items attributable to that investment.
Odin will annually provide information about each US investor’s share of dividend income, capital gain, capital loss and other relevant tax items for US federal income tax purposes, typically in connection with a distribution event (e.g. an exit or dividend).
What information Odin provides to US investors
When there is a distribution (exit, dividend or similar), Odin sends each investor a Distribution Notice by email to the address associated with their Odin account. This notice sets out, among other things, the amount of income associated with that distribution for their records.
If a syndicate investor has not received any distributions or Distribution Notices from Odin in respect of a particular investment, they have most likely not had any income relating to that investment so far. On the deal page for each investment on the Odin platform investors can also access supporting information (for example, a Proof of Investment document), which they can share with their tax adviser.
Odin does not complete US tax forms on behalf of investors. Odin provides information; investors and their advisers are responsible for preparing and filing any required returns.
Possible US reporting obligations (Forms 8938 and 8865)
Depending on an investor’s circumstances, they may have additional US reporting requirements in relation to their Odin investments. In particular:
They may be required to file IRS Form 8938 (Statement of Specified Foreign Financial Assets) if the value of their foreign financial assets, including Odin nominee investments, exceeds the relevant dollar thresholds, unless the investment is held through an account maintained with a US financial institution.
In some circumstances, they may also be required to file IRS Form 8865 in relation to the constructive partnership treatment of their Odin nominee investment.
Substantial penalties can apply for failures to file required forms (such as Form 8938) on time, unless such failure is due to reasonable cause and not willful neglect. Investors must consult a US tax adviser about whether these or any other forms are required in their case.
Alternative characterisations and PFIC risk
It is possible that the IRS may disagree with Odin’s intended treatment of a Nominee Investment as a constructive partnership and may seek to characterise the investment differently - for example, as an investment in a passive foreign investment company (PFIC). Any such alternative characterisation could affect the timing, amount and character of income, gain or loss that an investor must report and could create additional reporting obligations (for example, on Form 8621).
Odin does not take a view on how the IRS will ultimately characterise an investor’s Odin investment and does not provide PFIC or other US tax advice. Investors must seek advice from an appropriately qualified US tax adviser on the proper treatment of their Odin investments and on any PFIC or other specialised reporting that may apply.
Blue Sky filings and K-1 forms
Odin does not handle US “Blue Sky” filings or state-by-state securities or tax requirements. If you or your US investors require assistance with these, you should engage an appropriate third-party provider.
Odin’s UK bare trust / nominee structures are not US domestic partnerships, and Odin does not prepare or issue US Schedule K-1 forms. US investors should work with their own tax advisers to determine how to report their Odin investments on their US tax returns using the information provided by Odin.
Ongoing disclaimer
The above discussion is intended solely for informational purposes for US persons investing via Odin’s UK bare trust / nominee structure. It does not constitute tax advice. You and your investors should always consult your own US tax advisers regarding the US federal, state and local tax consequences of investing via Odin, and regarding any tax reporting or filing obligations that apply.
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Tax reporting in other domiciles
Because Odin 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.
Because of this tax transparency, any of your investors, as beneficial owners of the shares, would pay tax wherever they were tax resident upon a liquidity event. Investors do not have tax liability in the U.K.
Odin does not provide tax advice in any geography, and if you or your investors have any questions we’d recommend seeking independent advice and/or speaking to qualified accountants.
The same applies to any other government-sponsored tax relief scheme operated in the investor’s home country. If they 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.