Venture Capital Trusts (VCTs) Explained
2009 March 9
Venture Capital Trusts were brought out in 1995. This was to encourage people to invest in unquoted companies. It is now possible for VCTs to invest in smaller companies that are quoted on the Alternative Investment Market. A Venture Capital Trust is a company that is listed on the stock exchange that you buy shares in. Its main purpose is buying and selling of smaller companies shares with the aim of making both capital and income.
This form of investment is high risk however with risk comes larger potential reward. It is a type of pooled investment because the shares are spread throughout other companies.
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At least 70% of the underlying investments must be held in qualifying companies.
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Only 15% of the trusts investments can be held in 1 single company.
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As with an Enterprise Investment Scheme the Venture Capital Trust can only invest in companies that is worth less than £7 million before investment and £8 million after.
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Tax Advantages of Venture Capital Trusts
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Income tax relief at a rate of 30% is given on VCT investments up to £200,000 in any single tax year. The shares need to be held for 5 years.
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Capital Gains Tax relief is given but shares need to be held for 5 years.
