Octopus launches ongoing adviser charges for VCTs

Octopus has launched an adviser charging RDR-ready solution for its venture capital trusts (VCTs) which will mean investors can pay initial and ongoing fees.

The company said investors would now be able to pay fees to their advisers without reducing the value of their initial investment qualifying for tax relief.

It added investors could invest continue to invest their total investment amount into the VCT to maintain the tax benefits of the offerings, which includes a 30 per cent income tax relief.

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Once invested, a set portion of the funds will be used to pay initial and ongoing adviser charges. However, if an investor has agreed lower terms with the adviser than the set amount then they will be issued additional new shares in the VCT.

The changes has come about due to the ban of commission to advisers under the RDR. Previously, most VCTs paid fees to the investment manager who then used part of this fee to pay advisers their commission.

Paul Latham, manager director at Octopus, said one option available was to take the adviser fees out before the VCT shares are purchased.

“While we could have chosen this option, this was not what the majority of our customers wanted,” he said.

“We also wanted to find a solution that enabled investors to benefit from the full tax relief on their investment.

“This meant finding a way for them to pay adviser charges once their investment was made, rather than carving out some of their investment to pay adviser charges before it was invested.”

Octopus said its solution had been accepted by the UK Listing Authority ahead of the company’s new fundraising for Octopus AIM VCT, Second AIM VCT and Octopus Titan.