Venture Capital Trusts  

Investment into VCTs on track for blockbuster year

Investment into VCTs on track for blockbuster year
 

Investment into venture capital trusts this tax year continues to break records as investors have put in more than double the total amount seen last year.

Since April 6 last year, £580m has been invested in VCTs with more than three months of the tax year remaining.

This compared with £256m in the previous tax year, according to Wealth Club.

VCTs have gained popularity in recent years due to the tax breaks they offer, as well as the potential for income that is increasingly attractive.

They have up to 30 per cent income tax relief, as well as a £200,000 allowance and there is no tax to pay on any dividends received.

Alex Davies, founder of Wealth Club, said restrictions on the amount wealthier investors could hold in a pension as well as rising taxes on dividends and buy-to-let meant VCTs had become one of the best tax-efficient investment options left.

“I believe the future is very bright for VCTs and that next tax year is likely to be even bigger than this.

“The tax problem isn’t going away, indeed from April 6 it will be even greater when both national insurance and tax on dividends rises. 

“The pension lifetime allowance is also frozen for another four years which means more and more people will be caught out by that and looking for alternative places to invest their money tax efficiently.”

He added that investing in start-ups and unquoted businesses had become a much more acceptable way of doing business, and many VCT companies were increasingly well known among investors.

“For investors looking for growth they are a lot more likely to find it in VCTs than on UK listed markets.

“There is also more help and encouragement out there than ever before for people who want to set up or scale a business which means there are a lot of opportunities out there for VCTs and subsequently the need to raise money.” 

Notable VCT fundraises in the past year include Octopus Titan, which raised £200m in 28 days, and Amati’s AIM VCT which raised £40m in four and a half days.

Last week Albion Capital launched an £80m VCT fundraise across six of its trusts.

By Friday it had raised £10m from its existing investors in an ‘early bird offer’.

Will Fraser-Allen, managing partner at Albion Capital, said this initial demand showed the VCT industry continued to support innovative high-growth small businesses.

“This [enables] them to access the support and funding they need to grow, enter new markets and drive employment across all parts of the UK,” he said.

sally.hickey@ft.com