Venture Capital Trusts (VCT)
 
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.
  
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.
  
The following tax reliefs are available on subscription for new shares
acquired after 6 April 2004 provided no more than £200,000
is invested in VCT shares per eligible person per tax year.
  
1. Initial Income Tax Relief of up to 40%.
This initial income tax relief will be withdrawn if the investor does not hold
the shares for a minimum period of 3 years for shares issued thereafter.
 
2. VCT dividends (including capital distributions of realised gains
on investments) are not subject to income tax.
 
3. Tax free capital gains on disposal of VCT shares,
whenever the disposal occurs.
Sources of new VCT shares