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PRIVATE EQUITY
 

About Venture Capital Trusts

A VCT's underlying investments must be predominantly in unlisted companies including those quoted on the Alternative Investment Market (AIM). These tend to be smaller, newly introduced companies to the AIM market, and consequently whilst there is scope for significant rewards from such an investment, there is also significantly more risk attached to owning such shares compared with those of more established 'blue chip' companies.

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VCT Tax Benefits

VCTs are required by the HMRC to meet VCT legislation and are subject to certain conditions. Within three years a VCT must have invested at least 70% of the funds it has raised in qualifying holdings, which are newly-issued shares and loans in companies carrying on certain trades wholly or mainly in the UK. The size of companies in which each VCT invests is governed by certain restrictions (such as the extent of their gross assets and the number of their employees) which were in force when the VCT was raised these regulations have been subject to change in recent budgets. The result is that certain VCTs may be invested according to the newer rules - if you have any queries about how this affects your funds, please contact us.

VCTs continue to offer significant advantage for tax-paying investors, whether purchased as new issues or on the open market via a broker:

On subscription
  • Income Tax relief of up to 30% on new issues, to a maximum investment level of £200,000 in the tax year
On distributions and disposal
  • Dividends free of Income Tax
  • Profits made on the disposal of VCT shares are free from Capital Gains Tax*


    • * these Dividend and CGT benefits apply equally to shares bought on the secondary market
On new launches
  • Many new VCTs are launched in the two months preceding the start of a new tax year, permitting investors to double their maximum subscription levels by 'straddling' the two tax years.

An investment in a VCT carries a higher risk than many other forms of investment. A VCT's shares, though listed, are likely to be difficult to realise. Prospective investors should regard an investment in a VCT as a long term investment. A VCT’s underlying investments will normally be in companies whose securities are not publicly traded or freely marketable and may, therefore, be difficult to realise and investments in such companies carry substantially higher risk than in larger companies. Investors interested in VCT investment are urged to seek independent financial advice in relation to whether this product is a suitable investment for them.

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