Interactive Investor

Venture Capital Trusts (VCTs)

Learn more about investing in VCTs with interactive investor.


What are VCTs?

Venture Capital Trusts (VCTs) started life in 1995. They were launched to encourage investment in early stage companies by offering attractive tax breaks to investors, in the form of 30% initial tax relief for investments up to £200,000 a year and tax-free dividends. 

VCTs invest in young entrepreneurial companies that are unquoted, with a relatively recent rule change requiring VCTs to invest in businesses that are typically less than seven years old. As such, these underlying investments carry considerably higher risk than do listed businesses on the London Stock Exchange. In return for taking that risk, VCT shareholders get a variety of generous tax breaks.

VCTs advantages and disadvantages

Benefits and risks associated with VCTs investing 

VCTs are highly tax-efficient, offering 30% income tax relief as long as the shares are held for five years, plus tax-free dividends and no capital gains tax on profits on the disposal of VCT shares. Investors can put up to £200,000 into VCTs each year. 

VCTs attract high earners (who should also be sophisticated investors) with few other options: they have reached their limits for pension contributions and used up their dividend tax allowance. As a general rule of thumb, if you pay 40% or 45% tax and have maxed out your pension and ISA, then VCTs are worth considering.  

The tax incentives are attractive, but it is important to remember the tax tail should never wag the investment dog. Performance overall has been creditable for VCTs, albeit some way behind mainstream equity markets. Over 10 years, the average generalist VCT has produced a share price total return of 123% (as at 17 July 2020), according to the Association of Investment Companies. This compares with 149% for the average UK all-companies investment trust. 

Over the past couple of years, VCTs have become riskier propositions as they are now required to invest in earlier-stage companies, mainly those that have been trading for less than seven years. In addition, the investable universe for VCTs has become more limited, with management buyouts excluded and investments in asset-backed firms restricted. One the one hand investing in younger businesses could lead to high returns, but at the same time risk is increased. 

It is important to point out that VCTs are complex products and are only suitable for sophisticated investors. Please ensure you understand the risks involved. If you are unsure about the suitability of any investment please seek financial advice.

Advantages

  • Investors can receive income tax relief of 30% on up to £200,000 invested in newly issued shares held for at least five years
  • Dividends paid out by VCTs are tax-free
  •  All capital gains on sale of shares are also tax-free

Disadvantages 

  • The underlying investments in VCTs are high-risk and have become riskier over the past couple of years, due to rule changes 
  • Charges levied by VCT provider tend to be high – around 1.75% to 2% a year is typical. In contrast funds and investment trusts tend to cost 0.85% to 1% a year. 
  • Tax benefits for VCT investors could at some point be taken away or changed 

Types of VCTs

Generalist VCTs

These VCTs invest in a wide range of companies in different sectors and stages of development.

AIM VCTs

As the name suggests they only invest in companies listed, or about to become listed, on the Alternative Investment Market (AIM).

Specialist VCTs 

Tend to focus their investment expertise on one particular sector, e.g. Healthcare.

Limited Life VCTs

 Set out on a 5+ year plan and will wind up the VCT at the end of this period.

VCTs Tax Rules and Benefits

Venture capital trusts (VCTs) are collective funds that take stakes in small companies that investors would generally regard as high-risk. VCT investors get a variety of generous tax breaks in return for committing their cash to those high-risk investments. These include:  

  • upfront income tax relief of 30% on investments of up to £200,000 in new VCT shares
  • tax-free dividends 
  • tax-free capital growth 

Are VCTs right for me?

Investors should feel comfortable that they meet the following criteria:

  • High net worth and sophisticated investors who are UK residents.
  • Investors who have a sufficient income tax liability to reclaim income tax relief at 30% of the amount subscribed.
  • Investors who have realised a capital gain that would attract Capital Gains Tax.
  • Investors who will not need access to their capital for at least five years and are comfortable with higher risk investments.

Why choose ii?

  • We charge a market-leading one-off fee of £30 (inc VAT) to process your VCT application.
  • Most VCT Managers offer broker discounts, which we will reinvest fully for you in new shares.
  • Unlike some brokers we credit all the trail income we receive from your VCT investments as cash in your account.

Current VCTs Offers

Here we list current VCT offers available for investment through interactive investor. Before investing, please ensure you have read and understood the key documents and 'how to apply through ii' information below.

Blackfinch Spring VCT Offering

Legal name(s)Blackfinch Spring VCT plc
TypeGeneralist
Minimum investment£3,000
Amount raising£20m with £10m over-allotment facility
Initial charge5.5%
Total discount3.0% (4.0% for existing Blackfinch investors)

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Calculus VCT Offering

Legal name(s)Calculus VCT plc
TypeGeneralist
Minimum investment£5,000
Amount raising£10m with £5m over-allotment facility
Initial charge5.0%
Total discount2.0% (2.5% for existing Calculus VCT investors)

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Downing FOUR VCT Offering

Legal name(s)Downing FOUR VCT plc - AIM Shares
Downing FOUR VCT plc - Healthcare Shares
Downing FOUR VCT plc - Ventures Shares
TypeAIM
Specialist
Generalist
Minimum investment£5,000 per investor (£1,000 minimum per Share class)
Amount raising£10m with £15m over-allotment facility in each Share class
Initial charge4.5%
Total discount2.25% (2.75% for existing Downing investors)

How to apply: This Offer's application process is online only via a service provided by the Company's receiving agent and registrar, The City Partnership (UK) Ltd. To apply through us please follow the 'Online application form' process outlined below.

Foresight Enterprise VCT Offering

Legal name(s)Foresight Enterprise VCT plc (formerly Foresight 4 VCT)
TypeGeneralist
Minimum investment£3,000
Amount raising£20m with £10m over-allotment facility
Initial charge5.5%
Total discount3.0% (3.5% for existing Foresight VCT investors)

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Foresight Williams Technology Shares Offering

Legal name(s)Foresight Solar & Technology VCT plc
Foresight Williams Technology shares of 1p each in the Company (“FWT Shares”)
TypeGeneralist
Minimum investment£3,000
Amount raising£20m with £10m over-allotment facility
Initial charge5.5%
Total discount3.0% (3.5% for existing Foresight VCT investors)

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Maven VCTs Offering

Legal name(s)Maven Income & Growth VCT 3 plc
Maven Income & Growth VCT 4 plc
TypeGeneralist
Minimum investment£3,000
Amount raising£20m (£10m per VCT), with £20m over-allotment facility (£10m per VCT)
Initial charge5.5%
Total discount3.0%

How to apply: This Offer's application process is online only via a service provided by the Company's receiving agent and registrar, The City Partnership (UK) Ltd. To apply through us please follow the 'Online application form' process outlined below.

Octopus Apollo VCT Offering

Legal name(s)Octopus Apollo VCT plc
TypeGeneralist
Minimum investment£5,000
Amount raising£40m with £35m over-allotment facility
Initial charge5.5%
Total discount3.5% (4.5% for existing Octopus Apollo VCT investors) if you apply before 27 May 2022. 2.5% (3.5% for existing Octopus VCT investors) thereafter.

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Octopus Future Generations VCT Offering

Legal name(s)Octopus Future Generations VCT plc
TypeGeneralist
Minimum investment£3,000
Amount raising£20m with £80m over-allotment facility
Initial charge3.0%
Total discount0.0% (1.0% for existing Octopus VCT investors)

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

ProVen VCTs Offering

Legal name(s)ProVen VCT plc
ProVen Growth & Income VCT plc
TypeGeneralist
Minimum investment£5,000
Amount raising£80m (Up to £20m per Company with £20m over-allotment facility per Company)
Initial charge5.5%
Total discount2.5%

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Puma Alpha VCT Offering

Legal name(s)Puma Alpha VCT plc
TypeGeneralist
Minimum investment£5,000
Amount raising£15m with £5m over-allotment facility
Initial charge3.0%
Total discount2.0% (3.0% for existing investors) if you apply before 31 December 2021

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Seneca Growth Capital VCT Offering

Legal name(s)Seneca Growth Capital VCT Plc
TypeGeneralist
Minimum investment£3,000
Amount raising£10m with £10m over-allotment facility
Initial charge5.5%
Total discount4.5% (5.5% for existing shareholders and existing Seneca investors) until 31 December 2021. 2.5% thereafter.

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

Triple Point VCT 2011 Offering

Legal name(s)Triple Point VCT 2011 plc
TypeGeneralist
Minimum investment£3,000
Amount raising£10m with £15m over-allotment facility
Initial charge5.5%
Total discount3.0%

How to apply: This Offer's application process requires you to follow the ‘Paper application form’ steps outlined in the ‘How to apply through interactive investor’ section below.

How to apply through interactive investor

VCTs FAQs

New to interactive investor?

Open a Trading account to invest in Venture Captial Trusts. VCTs are classified as a Complex Instrument so you will need to complete our online appropriateness assessment once you have opened your account.

Already an ii customer?

As VCTs are classified as a Complex Instrument you must first complete our online appropriateness assessment, which can be found when you log in to your Trading Account.