Enterprise Investment Schemes - are they as good as they're made out to be

[Kaybush]

My elderly parents have recently been advised by an inheritance tax lawyer to sell a large house they own in London and put the proceeds into an Enterprise Investment Scheme.

They currently rely on rental income from the house, but have been told that the annual dividends and annual growth would be more than they're getting in rent.

Through experience, they've always been of the mindset that your money is safer in property than in investments but the EIS is sounding unbelievably attractive on paper and they've been told they almost never lose money (and if they do it's negligible).

I'm a bit worried that this all sounds a bit too good to be true and wondered if any Mumsnetters have money currently invested in an EIS and can advise.

An EIS is generally a high risk investment. However, when looking at an IHT situation, it can be considered that the certainty of losing 40% of your estate above the IHT exemptions if no action is taken is an even higher risk strategy than using an EIS.

As long as they are taking proper advice and the underlying investment is sound then it could well be in their best interests but you are right to be wary and check it out properly.

@Sunseed Thanks - we did think the same, in that doing nothing would actually lose more money in IHT eventually!

Anyone who believes salesmen saying their investment never loses money deserves to be darwinianly separated from said money for good...

What is the underlying investment ? Surely the EIS is just a wrapper for an underlying investment which could be a llama farm or a cupcake shop or anything.

Anyone who believes salesmen saying their investment never loses money deserves to be darwinianly separated from said money for good...

Yes, but, with some of these schemes, there is such a high saving/reduction of tax that the investment doesn't have to increase in value at all- in some, it can lose value and you're still quids in. I've certainly seen examples where the tax relief can be over 100% of the investment so even if the investment crashes to zero, they're still better off. It's all a matter of what income/gains/estate values they have.

I’d be more inclined to AIM or BPR products or at least a mix.