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Savings and Investment - Venture Capital Trusts

 

Venture Capital Trusts ( VCTs ) - Savings and Investment


About Venture Capital Trusts

Venture Capital Trusts ( VCTs )
Venture Capital Tursts ( VCTs ) provide capital finance for small and expanding companies with the aim of making capital gains for investors. They are a tax efficient way to invest large sums of money and are aimed at medium to large net worth private investors.

Venture Capital Trusts were introduced in the Finance Act 1995 and they have proved to be not as risky than originally thought. The last Conservative government created VCTs to encourage investment into new United Kingdom businesses.
Investors with larger portfolios can now invest up to £200,000. VCT shares issued after 5 April 2000 need only be held for three years to retain the initial tax reliefs, but to obtain the full benefits of the investment, the shares should be held for as long as possible. Most VCTs aim to invest the majority of assets in qualifying companies, 80% of which should be established companies or management buyouts. All VCTs, which have been running for a year or more, have paid tax-free dividends.

A VCT is actually a company in itself. You will effectively be investing into a company, which in turn invests in small companies. The managers of the VCT have three years in which to choose companies to invest in and during this time they place the money into cash, gilts or bonds. As they become more sophisticated VCTs are investing in funds such as smaller company funds or funds of hedge funds, to maximise their returns.

You have to maintain a VCT for a minimum of three years to benefit from the tax reliefs, this was reduced from five years. VCTs can usually be separated into three different types, AIM, Technology and General. Some trusts invest in a combination of all three of these areas. VCTs have now started to become more focused and some invest only in one sector for example media or healthcare.


List of Venture Capital Providers

 

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before making any important decisions about your finances.