Venture Capital Trust (VCT)

 A VCT can offer investors 30% tax relief and tax free dividends. Invest in young, entrepreneurial companies with generous tax reliefs. Find out more below

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:

Tax Reliefs

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.

Key Risks

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.

VCTs have some liquidity, and can be sold on the open stock market, but normally at a share price lower or significantly lower than the value of the underlying assets. They trade at a discount to Net Asset Value or NAV, and the VCT manager may have a buy offer that can buy back shares at a discount to NAV. Investors must hold their investment for a minimum holding period of five years to retain the income tax relief.

Click here to see our current open offers.

You can also find more information on VCT on the HMRC website here

Risk Warning

Our investment products may place your capital at risk and the value of them may go down as well as up and an investor may not get back the amount they invest. Investments in unquoted early stage/small companies and funds that invest in these smaller companies, including but not limited to, the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT), Social Investment Tax Reliefs (SITR) and are high risk and you should not invest unless you can afford total loss or if you are likely to require the capital in the near term since such investments can be difficult to realise.

The tax treatment of the investments depends on the individual circumstances of each investor and may be subject to change in future. The availability of tax reliefs depends on the Company invested in maintaining its qualifying status. This information provided on our website is based on our understanding of current taxation law and HM Revenue and Customs practice, which may change in the future. The content of our website is not intended to constitute investment, tax or legal advice. Neither past performance or forecasts are reliable indicators of future results and should not be relied upon. We recommend you seek independent advice before investing in our investment products.