Fuel Ventures’ James D’Mello predicts a positive new fiscal year and discusses the company’s VCT approach

With a new tax year approaching, we at GBI Magazine are excited to bring you a new series of exclusive interviews with industry experts. In this series, we speak to key figures in the tax efficiency field to hear their views on the new tax year, their thoughts on the 2023-2024 tax year and their tips for advisors.

The first in this series is with James Dmello, Head of IFA Distribution at Fuel Ventures. He gives his view on the year ahead and outlines the key lessons that investors will have learned from the 2023-2024 tax year.

Question: It’s a new tax year, but what does that mean for tax-efficient investing?

“After a brief respite for IFAs and providers from the chaos that is always the last few weeks of the tax year, a new tax year brings new opportunities for investors to take advantage of tax-efficient investment schemes such as the SEIS, EIS and VCT. As most IFAs will know, these schemes are designed to encourage investment in innovative, young, growth-oriented businesses by offering attractive tax relief to reduce the risks associated with start-ups.

“For investors, apart from the investment benefits, this means the ability to offset a portion of their investment against their income tax liabilities, potentially defer capital gains and enjoy tax-free growth on these investments. Given the recent cuts to CGT and dividend payments, this is an excellent time to reassess financial targets and consider how leveraging these schemes could align with long-term investment strategies while supporting Britain’s vibrant startup ecosystem to support.”

Q: Will it be a happy new tax year for tax-efficient investing?

“I believe that, despite wider economic and political uncertainties, the stability and continued availability of SEIS, EIS and VCT schemes provide a reliable avenue for investors looking to diversify their portfolios and support early-stage companies with potential for substantial growth.

“This year we are likely to see more investors take advantage of these opportunities as awareness of their benefits grows. The tax-efficient investment landscape is expanding with new funds coming to market (Fuel Ventures launched our new VCT in January 2024 and raised one of the largest initial fundraisings for a new VCT provider thanks to our partners and investors) and This, coupled with the reversal of the angel investor rule changes, suggests that investors can approach the new tax year with justified optimism.

Question: Can lessons be learned from 2023-2024?

“Several important lessons have emerged that investors in the venture capital industry can benefit from. Firstly, the importance of diversification was underlined, as market fluctuations highlighted the risks of over-concentration in one investment area. Investors have seen the benefits of diversifying their investments across different sectors and stages of business development.

“Another important point is the value of due diligence. The performance of the SEIS, EIS and VCT investments over the past year has shown that thorough research and selective investment choices are essential. This approach helps limit the risks associated with early-stage investments and maximizes potential returns. These lessons from the previous tax year are invaluable as they provide a basis for making informed investment decisions in the new tax year and holding fund managers accountable for their performance and service delivery.”

Q: With a general election likely to take place, what is the outlook for the year ahead?

“With a general election, the prospects for tax-efficient investments may involve a degree of uncertainty, which is typical of major political events. Historically, however, programs such as SEIS, EIS and VCT have enjoyed cross-party support for their role in stimulating economic growth and supporting innovative startups. (For example, the S/EIS was introduced under a Labor government.) Therefore, I expect continued support for these initiatives regardless of the election outcome.

“That said, investors should be prepared for potential policy shifts that could impact the investment landscape. By being proactive in understanding these elements, IFAs and their investors can deal effectively with any changes. While the political landscape may introduce some variability (when doesn’t it!?), the fundamental appeal of S/EIS & VCT, particularly its role in promoting economic resilience and innovation, is likely to ensure its continued viability as attractive investment strategy.”

Q: Finally, do you have any tips for advisors on how to best benefit from tax-efficient investments for their clients, and why?

“The most important thing I will say about this is that the types of investments that customers get access to through these schemes are 100x more interesting for most customers than whatever their funds in their SIPP or ISA made that year. These types of investments are the kind of things that clients will talk to their friends/colleagues about and, if done right, should result in referrals to other clients for the IFA.“

James D’Mello

Head of IFA Distribution – Fuel Ventures

James has gained a wealth of experience over the past 15 years in various sectors of the financial services industry, including banking, pensions and venture capital. During this time, his primary focus has been on the IFA/intermediary market, where he has represented companies such as MetLife, Kuber and, most recently, The SidebySide Partnership. At Fuel, James leads the IFA distribution team.