Venture Capital Trusts (or VCT) are specialised funds that invest in new, small, innovative companies that need some financial support.

Because of their importance in supporting the economy, VCTs can offer quite a few tax benefits to investors:

1. Tax reliefs when you invest

• 30% Income Tax Relief: for example, for a £10,000 investment, your income tax is reduced by £3,000 that year. If your tax bill for the year is less than the relief you can “Carry Back” some or all of it to the previous tax year
• This income tax relief also applies to dividends that you might get from VCTs.
• You need to hold the VCT shares for 5 years. Otherwise, you’ll have to pay the Income Tax relief back to HMRC.

2. Tax reliefs when you exit your investment

• 100% Capital Gains Tax Exemptions: all your gains from selling your VCT shares are exempt from Capital Gains Tax.
• This applies for both newly issued shares and shares bought on the secondary market
• You don’t need to hold the shares for a minimum amount of time (like you have to do for SEIS and EIS) to benefit from this exemption.

You should also remember that, unlike EIS, SEIS, and SITR investments, VCTs are not eligible for Inheritance Tax Relief.

How to invest in VCT funds

While EIS and SEIS can provide slightly better tax reliefs, VCTs can also have a place in your portfolio of tax-efficient investments. They’re all still very high-risk investments, though – you shouldn’t invest only because of the tax reliefs.

You can find VCT funds through platforms like:

• Wealth Club
• Interactive Investor
• Hargreaves Lansdown (when their service resumes post-COVID)

The maximum amount you can invest is £200,000.

Can TaxScouts help with VCT reliefs?

Yes.

Sign up and we’ll assign you one of our certified accountants who can tell you exactly what information we need from you.

After that, we’ll file your Self Assessment tax return on your behalf.