Tax Efficient Investments  

Lack of supply spurs ‘mad dash’ for VCTs

This article is part of
The Guide: Tax Efficient Investing

“A number of managers [probably] had sufficient cash that they didn’t feel the need to raise more this year given the relatively low investment levels last year. Now the rules are bedded in, the investment rate is increasing.” 

But while the supply may be smaller, he says the demand may not be that much higher than normal, in spite of the pension restrictions. Instead it could simply be a timing difference, where investors have been encouraged to invest sooner rather than later because of the well-documented changes. 

Tony McGing, chief executive of Downing, agrees this fundraising trend is “not unexpected, given that supply has been reduced as a consequence of restrictions on the number of companies that qualify for VCT funding”. He also highlights that the consistency of dividends among VCTs has been a key driver for those affected by pension changes. 

Mr McGing adds: “We’re also beginning to see the typical last-minute spike in fundraising, as people will always leave this to the last minute despite encouragement from the industry to invest early – it’s just human nature.” 

Looking ahead, Mr Davies says: “It seems that we will face at least the same capacity issues as we did this [tax] year, next year. In addition, I don’t think the effect of pension changes has really kicked in yet. A lot of people still don’t understand that they have been affected. 

“This year there are still quite a few high earners who can carry forward unused pension contributions from previous years, so will only start seriously considering alternatives next tax year or the year after.”

Nyree Stewart is features editor at Investment Adviser

 

Closed generalist VCTs with track record

FundTax year 2016-17 (excluding overallotment)Amount raised at closeClosing date(fully subscribed)
Albion Crown Place VCT ord share£6m£6m22/02/17
Albion Development VCT ord share£4m£4m30/01/17
Albion Enterprise VCT ord share£6m£6m20/02/17
Albion Kings Arms Yard VCT ord share£6m£6m22/02/17
Albion Technology & General VCT ord share£6m£6m02/02/17
Albion Venture Capital Trust ord share£6m£6m09/02/17
British Smaller Companies VCT£4.25m£4.25m27/02/17
British Smaller Companies VCT 2 (top up Jan 2017)£4.25m£4.25m27/02/17
British Smaller Companies VCT 2 (top up Jan 2017)£4.25m£4.25m09/01/17
Calculus VCT D shares£4m£4m02/02/17
Maven Income & Growth VCT 6 ord shares£8m£8m07/02/17
Northern 2 VCT ord share£4.3m£4.3m09/02/17
Northern 3 VCT ord share£4.3m£4.3m09/02/17
Northern Venture Trust ord share£4.3m£4.3m09/02/17
Proven Growth & Income VCT ord shares £40m£39.2mClosed 31/01/2017
Source: www.taxefficientreview.com. As at March 10 2017