Summary

Venture Capital Trusts (VCTs)
VCTs provide capital finance for small expanding companies with the aim of making capital gains for investors. They are a tax efficient way to invest larger sums of money and are aimed at medium to large net worth private investors. First introduced in the Finance Act 1995 they have proved to be much less risky than originally thought. The last Conservative government created VCTs to encourage investment into new UK businesses.

Investors with larger portfolios can invest up to £200,000, increased from £100,000 in 2004. VCT shares issued after 5 April 2000 need only be held for three years to still retain the initial tax reliefs, but to obtain the full benefits of the investment vehicle, the shares should be held for as long as possible.

Most VCTs aim to invest the majority of assets in qualifying companies, 80% of which are established companies or management buyouts. All VCTs, which have been running for a year or more, have paid tax-free dividends.