Introduction

A venture capital trust (VCT) is a quoted company that invests in shares and securities issued by qualifying unquoted trading companies with a permanent establishment in the UK.

A subscription in eligible shares of a qualifying VCT is a tax efficient investment for the individual. The individual can benefit from the following tax reliefs:

1. •

   income tax relief of up to 20% on the amount invested (30% for shares issued from 6 April 2006 up to 5 April 2026)

2. •

   income tax exemption for dividends from the VCT

3. •

   capital gains tax (CGT) exemption on any gain on the sale of the VCT shares

These reliefs are considered in further detail in the Venture capital trusts income tax relief guidance note. As tax relief is only available for subscriptions by an individual in ‘eligible’ shares in a ‘qualifying’ VCT, it is important to ensure that the conditions are met. The conditions for a valid investment are discussed below.

VCTs are attractive to investors who want to spread their risk by indirectly investing in a