Need help? Call Free 0808 1005045 (Mon-Fri 9am-5pm)

Venture Capital Trusts (VCTs)

A tax efficient investment for sophisticated investors who don’t mind taking risks with their capital.

We do not actively promote VCTs. You must seek the VCT that you want to invest in before you can benefit from our services. Once you have decided, we will be happy to arrange for a prospectus / prospectuses to be sent to you.

You should be a confident and knowledgeable investor before considering a VCT investment.

Tax Benefits

  • 30% tax rebate on investments up to £200,000 (new issue shares only)
  • No capital gains tax liability on disposal
  • Tax free dividends
  • Income tax relief

Although anyone can invest in a VCT, you can only receive tax relief equal to the amount of income tax that you pay, capped at £60,000 (30% of £200,000). For example, if you invest £200,000 and only have an income tax liability of £10,000 you will only receive tax relief of £10,000.

You must hold shares for 5 years to retain the tax rebate. If you sell your shares before 5 years has passed you will have to pay some or all of the tax rebate back.

The tax rebate is only available on new issues of shares in a VCT. Be careful if you buy shares on the secondary market in the same tax year - these will count toward the £200,000 VCT allowance even though you won’t be entitled to any income tax relief.

Capital gains tax and dividend tax

There is no capital gains tax liability on the disposal of VCT shares, whether new issue or purchased from the secondary market. Dividends are tax free too.

Please note: The tax benefits associated with VCTs are subject to change and will always depend on your own circumstances. VCT investments must meet with other criteria too, for example, if the VCT Manager fails to meet the relevant investment rules, such as investing 70% of the fund within three years, the tax benefits could be withdrawn retrospectively.

How do I claim tax relief?

Claiming your tax relief is easy. There is a special VCT section on the HMRC tax return to complete. If you are employed or retired, the income tax rebate will be paid by HMRC via your tax code, as a lump sum rebate or, if you are self-employed, via a reduction in Schedule D tax.

What are the risks

VCTs are aimed at sophisticated, wealthy investors who are not only able to take a long-term view but are prepared to accept loss of capital. A VCT is a high risk investment. Why? Well, because the companies that VCTs generally invest in are new, fledgling, start-up companies there is a high risk of failure. With little or no financial track record it isn’t easy to determine which companies will be successful and which are likely to fail. Remember that you have to hold your VCT for 5 years to benefit from the 30% income tax rebate, so it is prudent to view a VCT as 5 to 10 year investment.

Although you can sell VCT shares if you need your money back you will be unlikely to receive all of the capital that you invested, especially in the early years. Furthermore, if you sell in the first five year you will have to repay some, or all of the reclaimed tax back.

How to invest in a VCT

VCTs have to issue a prospectus at launch which gives details of specific risks, you must read this thoroughly before making an investment. You can request prospectuses for VCT’s from us by phone, FREEPHONE 0808 100 5045 or by emailing info@commshare.com.

If you decide to go ahead you will need to complete the application form found at the back of the prospectus. The completed form needs to be sent to us together with your cheque payable to the VCT (not CommShare). You will then receive your share and tax certificates directly from the VCT company once the shares have been allotted. Please be aware that this often takes at least four weeks as shares are generally allotted, at most, once a month.

CommShare doesn't give investment advice. If you're unsure about suitability, you should seek professional advice. Past performance of an investment is not a guide to future performance. The value of investments or income from them can go down as well as up. You might not get back the amount you invest. Current tax levels and reliefs will depend on your individual circumstances.

  • CommShare Ltd, 16 Hatherley Road, Sidcup, Kent, DA14 4BG
  • Tel: 020 8308 1308 | Fax: 020 8308 1304
  • email: info@commshare.com

CommShare Ltd is Authorised and Regulated by the Financial Conduct Authority.