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 |
| Type | Generalist |
| Minimum investment | £3,000 |
| Amount raising | £20m with £20m over-allotment facility |
| Initial charge | 5.5% |
| Total discount via ii | 4.5% (5.5% for existing Blackfinch investors) until 27 January 2025. Then 4.0% (5.0% for existing Blackfinch investors) if you apply before 3 April 2025. 3.0% (4.0% for existing Blackfinch investors) thereafter. |
| Net initial charge | 1.0% (0% for existing Blackfinch investors) until 27 January 2025. Then 1.5% (0.5% for existing Blackfinch investors) if you apply before 3 April 2025. 2.5% (1.5% for existing Blackfinch 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.
Calculus VCT Offering
| Legal name(s) | Calculus VCT plc |
| Type | Generalist |
| Minimum investment | £5,000 |
| Amount raising | £10m with £10m over-allotment facility |
| Initial charge | 5.0% |
| Total discount via ii | 4.0% (4.5% for existing Calculus VCT shareholders) until 17 December 2024 or the first £2m raised, whichever is soonest. Then 3.5% (4.0% for existing Calculus VCT shareholders) until 19 February 2025 or the next £3m raised, whichever is soonest. 2.0% (2.5% for existing Calculus VCT shareholders) thereafter. |
| Net initial charge | 1.0% (0.5% for existing Calculus VCT shareholders) until 17 December 2024 or the first £2m raised, whichever is soonest. Then 1.5% (1.0% for existing Calculus VCT shareholders) until 19 February 2025 or the next £3m raised, whichever is soonest. 3.0% (2.5% for existing Calculus VCT shareholders) 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.
Foresight Technology FWT Shares Offering
| Legal name(s) | Foresight Technology VCT plc FWT shares of 1p each in the Company ("FWT Shares") |
| Type | Generalist |
| Minimum investment | £5,000 |
| Amount raising | £15m with £10m over-allotment facility |
| Initial charge | 5.5% |
| Total discount via ii | 4.0% (4.5% for existing Foresight VCT shareholders) until 29 November 2024. 3.0% (3.5% for existing Foresight VCT shareholders) thereafter. |
| Net initial charge | 1.5% (1.0% for existing Foresight VCT shareholders) until 29 November 2024. 2.5% (2.0% for existing Foresight VCT shareholders) 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.
Guinness VCT Offering
| Legal name(s) | Guinness VCT plc |
| Type | Generalist |
| Minimum investment | £5,000 |
| Amount raising | £10m with £5m over-allotment facility |
| Initial charge | 5.5% |
| Total discount via ii | 4.5% (5.5% for existing Guinness investors) until 31 October 2024. 4.25% (5.25% for existing Guinness investors) until 31 November 2024. 4.0% (5.0% for existing Guinness investors) until 31 December 2024. 3.75% (4.75% for existing Guinness investors) until 31 January 2025. 2.75% (3.75% for existing Guinness investors) until 28 February 2025. 2.5% (3.5% for existing Guinness investors) thereafter. |
| Net initial charge | 1.0% (0% for existing Guinness investors) until 31 October 2024. 1.25% (0.25% for existing Guinness investors) until 31 November 2024. 1.5% (0.5% for existing Guinness investors) until 31 December 2024. 1.75% (0.75% for existing Guinness investors) until 31 January 2025. 2.75% (1.75% for existing Guinness investors) until 28 February 2025. 3.0% (2.0% for existing Guinness investors) thereafter. |
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.
ProVen VCTs Offering
| Legal name(s) | ProVen VCT plc ProVen Growth & Income VCT plc |
| Type | Generalist |
| Minimum investment | £5,000 |
| Amount raising | £30m (up to £15m per Company) with a £10m over-allotment facility (up to £5m per Company) |
| Initial charge | 5.5% |
| Total discount via ii | Until first £5m raised per Company, 3.0% (3.5% for existing shareholders) in November 2024, 2.9% (3.25% for existing shareholders) in December 2024, 2.8% (3.0% for existing shareholders) in January and February 2025. 2.5% thereafter. |
| Net initial charge | Until first £5m raised per Company, 2.5% (2.0% for existing shareholders) in November 2024, 2.6% (2.25% for existing shareholders) in December 2024, 2.7% (2.5% for existing shareholders) in January and February 2025. 3.0% thereafter. |
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.
Puma AIM VCT Offering
| Legal name(s) | Puma AIM VCT plc |
| Type | AIM |
| Minimum investment | £3,000 |
| Amount raising | £10m with £10m over-allotment facility |
| Initial charge | 3.0% |
| Total discount via ii | 3.0% until 20 December 2024. 0% thereafter. |
| Net initial charge | 0% until 20 December 2024. 3.0% 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.
Puma Alpha VCT Offering
| Legal name(s) | Puma Alpha VCT plc |
| Type | Generalist |
| Minimum investment | £3,000 |
| Amount raising | £15m with £5m over-allotment facility |
| Initial charge | 3.0% |
| Total discount via ii | 2.0% (3.0% for existing Puma VCT investors) if you apply before 28 February 2025. 0% (1.0% for existing Puma VCT investors) thereafter. |
| Net initial charge | 1.0% (0% for existing Puma VCT investors) if you apply before 28 February 2025. 3.0% (2.0% for existing Puma 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.
Seneca Growth Capital VCT Offering
| Legal name(s) | Seneca Growth Capital VCT Plc |
| Type | Generalist |
| Minimum investment | £3,000 |
| Amount raising | £5m with £5m over-allotment facility |
| Initial charge | 5.5% |
| Total discount via ii | 3.5% (4.5% for existing shareholders and existing Seneca investors) until 28 February 2025. 2.5% (3.5% for existing shareholders and existing Seneca investors) thereafter. |
| Net initial charge | 2.0% (1.0% for existing shareholders and existing Seneca investors) until 28 February 2025. 3.0% (2.0% for existing shareholders and existing Seneca 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.
Triple Point Venture VCT Offering
| Legal name(s) | Triple Point Venture VCT plc |
| Type | Generalist |
| Minimum investment | £3,000 |
| Amount raising | £10m with £20m over-allotment facility |
| Initial charge | 5.5% |
| Total discount via ii | 4.0% (5.0% for existing Triple Point investors) until first £5m raised or until 31 December 2024, whichever is soonest. 3.0% (4.0% for existing Triple Point investors) thereafter. |
| Net initial charge | 1.5% (0.5% for existing Triple Point investors) until first £5m raised or until 31 December 2024, whichever is soonest. 2.5% (1.5% for existing Triple Point 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.