VCTs

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Like the enterprise investment scheme (EIS), the venture capital trust (VCT) regime is designed to encourage investment in smaller, higher-risk trading companies.

A VCT is a company (not a trust), approved by HMRC, whose shares are admitted to trading in such a way that they meet the listing condition explained in Practice Note: VCTs—VCT conditions for HMRC approval—The listing condition.

Individuals can benefit from a range of tax reliefs, and spread their investment risk, by subscribing for (or, in the case of some of those reliefs, buying) shares in a VCT, which, in turn, subscribes for newly issued shares or debt in unquoted companies (companies listed on AIM are unquoted for these purposes).

Summary of VCT tax reliefs

There are three principal tax reliefs potentially available to qualifying individual investors in VCTs, two concerning income tax and one concerning capital gains tax (CGT):

  1. •

    investment income tax relief at 30% of the amount subscribed for new ordinary shares in a VCT, up to the annual investment limit in VCTs of £200,000 (VCT Annual Limit), and subject to clawback if the shares are disposed of within five years

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