Venture Capital Trusts 

VCT opens up to Isa investment

VCT opens up to Isa investment

Foresight Group is to accept Isa funds into its venture capital trust (VCT) for the first time.

Through a partnership with Platform One, the group will allow investors to transfer funds from existing Isa products into its Foresight 4 VCT, whilst maintaining Isa status. 

Platform One’s service will facilitate full or partial Isa transfers along with a range of wrappers, including Innovative Finance Isas. Investors will receive a 0.5 per cent discount on initial charges. 

Entry costs of 2.5 per cent apply to advised investors and 5.5 per cent for direct investors. Other costs include a 0.75 per cent performance fee.

On an investment of 10,000 advised investors will typically be charged £550 if they cash in after one year, resulting in a reduction in yield (RIY) of 5.5 per cent; a charge of £1,108 if they cash in after three years (3.84 per cent RIY), and £1,634 if cashing in after five years (3.51 per cent RIY).

On a £10,000 investment direct investors will be charged £850 if cashing in after one year, £1,391 after three years, and £1,900 after five years.

Foresight 4 VCT has about £100m of assets invested across a portfolio of 21 unquoted UK companies including Datapath Group, TFC Europe and Aerospace Tooling Corporation.

Its VCT aims to give investors a target annual dividend of 5 per cent tax-free income.  

This is typically achieved from a combination of dividends and interest received on investments and the distribution of capital gains from trade sales or flotations, the group stated.

Since their introduction in 1995, the VCTs have raised approximately £7.7bn of funds, according to Foresight, while the 2017/18 tax year saw VCT funds reach their second highest figure on record at £745m.

Bethany Dudley, associate sales director at Foresight Group, said: "It makes sense for investors who have done the right thing in utilising their tax free Isa allowances over several years to be able to deploy those tax free funds into Foresight 4 VCT and take advantage of the tax reliefs available without sacrificing their lifetime Isa allowances.  

"With persistent low interest rates, we’ve seen increasing demand from investors looking to put their savings to better use and therefore we are delighted to offer them this additional option."

Martin Bamford, chartered financial planner at Informed Choice, said: "Innovative finance Isas made VCTs an eligible Isa investment but providers have been relatively slow to make this option available to investors.

"However, using your existing Isa funds to subscribe to a new VCT issue won’t be for everyone, given the risks and restrictions involved.

"I suspect the Treasury won’t be too excited about granting 30 per cent income tax relief to new VCT subscriptions made with existing Isa monies either, should this market start to really take off."