What Tax Relief do VCTs Offer?
- 30% income tax relief on the amount you invest up to £200,000 per tax year
- Exemption from income tax on dividends paid by the VCT
- Exemption from capital gains tax (CGT) on disposal of VCT shares
Under current legislation, the Government offers 30% Income Tax relief on VCTs, limited to total VCT investments of £200,000 per person per tax year. For example, if you invested £10,000, you would receive £3,000 back in Income Tax relief – either as a lump sum rebate or through your salary in the form of a tax code amendment. It is in the Government's interests to support UK smaller businesses which could become the big businesses of the future, and offers tax incentives to encourage investment in them.
Initial Income Tax relief is limited to the amount which reduces the investor's income tax to nil – so if you have only paid £5,000 in Income Tax, you would only be eligible for a £5,000 rebate – and is only available for VCT shares in the year of subscription. If the investment is not held for five years, or the VCT does not invest at least 70% of the funds raised in qualifying investments within three years, the investor's initial tax relief will be withdrawn and you will have to repay it. Dividends paid by VCTs are not liable to any tax. To be eligible for Income Tax relief, you must buy shares in a VCT upon its launch, not once it has already been established.
When you eventually sell your VCT, any gain you make will be exempt from Capital Gains Tax. You will be eligible for Capital Gains Tax relief even if you buy into a VCT once it is quoted on the stock market.
Most VCTs will have a provisional tax clearance, because they have three years to meet the qualifying provisions, for example, investing a minimum of 70% in qualifying securities. While no VCT has yet failed to meet the requirements during that time, the Inland Revenue grants provisional relief subject to the conditions actually being met.
Levels and bases of, and relief from taxation are subject to change. To invest in any of the Venture Capital Trusts below, just click on the links in the table and fill in your details to save up to 3.00% on standard inital charges and receive a complete application pack email.
These VCTs typically invest in unquoted companies in the hope of making a profit when the company is sold or floated.