Venture Capital Trusts (VCTs) are listed companies that are run by a fund manager and in turn invest in smaller companies that are not quoted on stock exchanges.
VCTs are more specialist investments investing into smaller, start-up companies, thus they are classed as higher risk and not suitable for the majority of investors..
The UK has a rich pool of start-up businesses, however, without funding they may never get off the ground. With VCTs the capital is channelled into some of the most promising businesses to help them grow and develop.
What is a VCT?
A Venture Capital Trust (VCT) is a company whose shares trade on the London stock market. A VCT aims to make money by investing in other companies that are typically very small and are looking for further investment to help develop their business.
There are very strict rules on how VCTs can invest your money and these types of investments must now be made in companies that have objectives to grow and develop.
Is a VCT right for you?
You might be considering a VCT investments if:
- You would like to get a tax relief by investing in higher risk funds
- You understand that you might get back less than you invested and are happy with that risk
- You are interested in potentially earning higher returns by investing in higher risk funds
The benefits and the risks
When you invest in new VCT shares you are entitled to claim a number of tax incentives on investments up to £200,000 each year. These include income tax relief, tax-free capital gains and tax-free dividends. We can run you through these benefits in our initial investment meeting.
As well as the tax benefits, VCTs can help diversify your investments and generate additional income while supporting British innovation and the UK economy.
We must point out that all investments contain an element of risk and VCTs are no exception. In fact, because they invest in small unlisted companies, VCTs should be considered as high-risk investments.
*Please note: Venture Capital Trusts are high risk investments and not suitable for the majority of investors and there is no guarantee that your investment will keep its original value. The value of your shares will go up or down significantly as the investments in the VCT change their value. A VCT maybe difficult to sell. The value of tax reliefs depends on your individual circumstances. Tax laws can change. Any tax reliefs depend on the VCT maintaining its qualifying status.