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What is a Venture Capital Trust?

A Venture Capital Trust (VCT) is where you put money into a fund that invests in smaller companies not listed on the stock market. Like with an Enterprise Investment Scheme, these companies are usually new set-ups that can’t get funding in the traditional ways, so your investment helps fill this gap.

How does it work?

You invest in new shares when a trust is launched or by buying shares from other investors when the trust has been established.

As the small companies grow in value, so does your investment. VCTs pool investors’ funds together to spread the risk across lots of different companies.

Venture Capital Trysts (VCT) invest in assets that are high risk and can be difficult to sell such as shares in unlisted companies. The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.

What are the benefits?

  • Income Tax relief of 30% when you buy newly issued VCTs as a tax credit against your total liability up to a max of £200,000 (this can’t exceed your total tax liability for the tax year).
  • No income tax on dividends with VCTs.
  • You won’t pay any Capital Gains Tax on profits from selling VCT shares. It doesn’t matter how long you’ve had them, but the company you own shares in must keep its VCT status.

Things to think about

  • If you buy existing VCT shares, you don’t get the tax relief.
  • You can sell your shares at any time and take your money out, but to keep the income tax relief, shares must be held for at least five years or you’ll lose the benefit.
  • Investing this way can give you big returns but is also considered high-risk because of the type of companies involved.

To talk to us about whether a VCT could be right for you, please send us a message using the form on the right-hand side of this page. Alternatively, you can call us on 01244 470 107 or email: info@moneytreewm.co.uk  

Tom Lenton

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