Or is the tax tail wagging the investment dog?
Yes, obviously, tax-advantaged financial planning is invariably better looked at earlier in the tax year. It clearly allows much more time to consider the investment opportunities as and when they arise. VCTs have been a great example of this – when the most popular ones open (and close) with little notice and clients will miss out if they’re not ready.
Does that mean then that considering EISs or VCTs in the final few weeks of the tax year is invariably wrong and simply the result of poor organisation? The answer is, of course, it depends. Which implies that there will be circumstances where investing in EISs or VCTs in the final few weeks of the tax year is entirely appropriate.
For some, it might be a brand new client; sometimes advisers can’t get a busy client to sign off on a proposed investment as part of their financial plan; and for others, it’s prompted by a change in the client’s circumstances – the tax return produces a surprise, for example, or the late announcement of a bonus that gets paid in March.
The corollary is also true however – this isn’t the reason to leave all tax year-end planning to February and March (or even April!).
As ever it comes back to suitability and appropriateness – the bread-and-butter of financial planning. Assessment of the client circumstances; their capacity for loss; their risk appetite; timings of investment; prospective liquidity; diversification & risk. If available products can’t satisfactorily lead to a suitable & appropriate recommendation then beggars can’t be choosers is not good enough.
Fortunately, with the wealth of products available – that will rarely be the case.
So, is the tax tail wagging the investment dog? Yes, in terms of timing. But no in terms of the best outcome for the client.
