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Venture Capital Trusts

A VCT is a company, broadly similar to an investment trust, which has been approved by HMRC and is listed on the London Stock Exchange. Under the VCT scheme, VCTs and their investors enjoy certain tax reliefs (summarised below).

The VCT scheme has been designed to encourage investment in small unquoted companies. Individuals invest by holding shares in a VCT. The VCT invests in a spread of small unquoted companies, enabling investors to spread their risk, just as they do by holding shares in an ordinary investment trust company. There are different reliefs and restrictions depending on whether the investor subscribes for new shares (which is bty far the most common approach) or buys exisitng shares in the market.

Investment Strategy

The investment approach depends partly on how the VCT plans to distribute returns to investors. There are two options:

Maximum investment:

£200,000 per tax year.

Pros:

  • 30% Initial tax credit
  • Tax free dividends
  • No CGT on gains
  • Highly regulated

Cons:

  • High running costs
  • 5 year minimum holding period
  • Shares usually trade at a discount to net assets

Useful sites

The Money Advice Service [1]
AIC [2]

Disclaimer

The information set out above is included for information purposes only and is not an offer or an invitation to buy or sell or a solicitation of an offer or invitation to buy or sell or enter into any agreement with respect to any security, product, service or investment. Any opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. All information is current as of the date of publication, subject to change without notice, and may become outdated over time.
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