This area of investment is fairly specialist but has in the past been extremely useful for those who had sold assets and were facing large Capital Gains Tax bills. Until the Budget in 2004, both VCTs and EIS's allowed deferral of Capital Gains Tax (CGT) liabilities, and both enjoyed 20% income tax relief.
Following the Budget, changes to VCTs mean that they can no longer be used to defer CGT. However, they now benefit from a 30% income tax "credit". The more limited benefits of CGT deferral are still available through an enterprise investment scheme (EIS), but these enjoy only a 20% income tax relief. The investments must be held for 5 years in order that the tax reliefs will not be reclaimed.
As the name suggests, VCTs are designed to encourage investment in "start-up" companies and smaller companies who are looking to expand (nonetheless some of these companies are "household names"). It is vitally important, therefore, that such vehicles, with their inherent investment risk, are managed by experienced Venture Capital Managers. Charlwood Leigh can help clients identify the best run VCTs, and tailor these investments to their individual requirements, to help them to manage the risk to their capital down to an appropriate level.
With generous income tax reliefs, tax-free dividends and growth free from Capital Gains Tax, VCTs are likely to increase in popularity with investors. If you would like to know about current investment opportunities,
contact us
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