Tax Benefits

VCTs offer significant tax advantages over most investment products. For new VCT shares, in summary, the tax reliefs available on investment are:

  • Income tax relief of up to 30% on the amount invested in new VCT shares
  • Tax free dividends
  • Tax free capital gains

On amounts invested up to £200,000 per person, per tax year, for individuals aged 18 or over who are UK tax payers. There is a minimum holding period of five years for new shares.

For existing VCT shares, the tax reliefs available on investment are:

  • Tax free dividends
  • Tax free capital gains

On amounts invested up to £200,000 per person, per tax year, for individuals aged 18 or over who are UK tax payers.

There is no minimum holding period for these tax reliefs for investors in existing VCT shares.

Income tax relief is only available for set-off against any income tax liability due, whether at the lower, basic or higher rate.

Income tax relief will not be available, or, where given, will be withdrawn where there is any disposal (except on death) of the shares before the end of the period of five years beginning with the date on which the shares were issued to the Investor.

The above is only a very brief summary of the UK tax position of Investors in VCTs and is based on the Company’s understanding of current law and practice.

Potential Investors are recommended to consult their own appropriate professional adviser as to the taxation consequences of their investing in a VCT.

Investment Risks

An investment in the Company should be regarded as long-term in nature as a sale by Investors of their Shares within 5 years will require a repayment of the income tax relief obtained and is, therefore, not suitable for all individuals.

  • Although shares in VCTs are listed on the Official List and admitted to trading on the London Stock Exchange, shares in VCTs are inherently illiquid and there may be a limited market in the shares primarily because the initial tax relief is only available to those subscribing for newly issued shares and shareholders may, therefore, have difficulty in selling them.
  • Levels and bases of, and relief from taxation are subject to change. Such change could be retrospective. The value of tax reliefs depends on the personal circumstances of holders of shares, who should consult their own tax advisers before making any investment. There can be no guarantee that a VCT fund will fulfil the criteria to obtain, or to enable it to maintain, full VCT status. If the VCT fund loses its approval as a VCT before investors have held their shares for five years, the income tax relief obtained will have to be repaid by such investors. Following a loss of VCT status, an investor will be taxed on dividends paid by the Company, and in addition, a liability to capital gains tax may arise on any subsequent disposal of shares.
  • VCT shares will usually trade at a discount to their underlying net asset value. The value of an investment in a VCT fund depends on the performance of its underlying assets and that value and the income derived from the investment may go down as well as up and an investor may not get back the amount invested. Share buy-back schemes are offered by some VCTs, enabling you to sell your shares back to the fund, usually at a discount to the Net Asset Value.
  • Investment in unquoted companies, by its nature, involves a higher degree of risk than investment in the main market. In particular, small companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock. Proper information for determining their value or the risks to which they are exposed may also not be available.

Realisation of unquoted company investments may be difficult and take considerable time. Constraints may be imposed on the realisation of investments in order to maintain the qualifying status of a VCT which may restrict its ability to obtain maximum value from its investments.