What is a VCT?
Venture Capital Trusts (VCTs) were established in 1995 by the government to help young, higher risk companies raise capital. VCTs are listed on the London Stock Exchange and can be likened to an investment trust. When you invest in a VCT, you become a shareholder in the trust, not the individual companies. Holding shares in a VCT gives investors exposure to a diversified portfolio of companies the manager has invested in.
Investments in a VCT are higher risk investments, please see our full risk warnings.
Under the current legislation investors are entitled to 3 generous tax reliefs from investing in a Venture Capital Trust, providing shares are held for a minimum of 5 years:
30% Income Tax Relief
Tax Free Dividends
Capital Gains Tax (CGT) Free Growth
* To benefit from the above tax reliefs, shares must be held for five years from the date of investment and the issuing company has maintained its qualifying status.
The information given above provides only a summary of the tax benefits. The rates shown are based on current UK legislation which could change in the future, possibly retrospectively. These tax benefits depend on individual circumstances. At Kin Capital we cannot give out tax advice. If you are unsure of your tax situation you should seek professional advice from a qualified tax adviser. Tax rules and regulations can be subject to change.
How Much Can I Invest?
Investors can invest up to £200,000 per tax year.
VCT Tax Relief
Subject to individual circumstances, investors subscribing for new shares in a VCT receive 30% tax relief on the amount they have invested, as a reduction in their income tax bill in the year in which the investment is made. This is subject to a maximum investment across all their VCT investments made in a particular year of £200,000, conveying a maximum £60,000 income tax relief in one year (assuming the investor has paid that much in income tax). Dividends from a VCT are tax-free and there is no capital gains tax on their disposal.
The investment must be held for a minimum of 5 years to retain an investor’s income tax relief. If VCT status is lost there will be a claw-back of the tax-relief. A VCT does not convey capital gains tax (CGT) deferral, Business relief, or Loss relief.
Soon after your VCT shares are allotted, you will receive a VCT share certificate and a VCT tax certificate.
You will need the former if you wish to sell your VCT shares (usually possible after 5 years to retain the tax relief). You will need the latter to claim your VCT tax relief.