Venture Capitalist Trusts

Venture Capitalist Trusts (VCTs) were introduced in 1995 to boost investment into young, growth orientated UK companies, offering access to some of the most entrepreneurial and therefore potentially high growth companies around.  However, investing in small companies can be risky so the Government offered sizeable tax breaks to make VCTs attractive.

• VCTs are public limited companies quoted on the London Stock Exchange and invest in the shares and securities of other companies; they are similar to investment trusts.
• Since they typically invest in small, often unquoted companies, they are considered to be higher risk and more suitable for high net worth investors. Please note that after 6 April 2006, VCTs are restricted to investing in smaller companies whose gross assets do not exceed £7million, which may increase risk.
• To compensate for the risk, VCTs offer very attractive tax benefits on amounts up to £200,000 – but you must hold for a minimum of five years.  
• Originally, VCTs were limited to investing in companies with gross assets below £15m; in the 2006 Budget this limit was reduced to £7m for 2006/07 tax year, as long as the investment is held for at least five years.  
• From 6 April 2007, qualifying investee companies must have fewer than 50 full time employees (when shares are issued) and are limited to raising a total of £2m from VCTs, or similar schemes, in any 12 month period
• If a VCT does not invest 70% in qualifying investments after three years the initial tax breaks can be withdrawn.  It must also not have more than 15% of its total investments in any one company.

You should be aware that an investment in a VCT is only suitable for investors who are capable of evaluating the risks and merits of the investment and who have sufficient resources to bear any loss which might result. You should take your own financial and tax advice before investing, based on your own individual circumstances. You should also view VCTs as a long-term investment. 

Stock markets and currency movements may cause the value of investments and the income from them to fall as well as rise and you may not get back the amount they originally invested.  When investments are made in unquoted securities or smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investment.  The secondary market for shares in VCTs is limited and as a result shares in VCTs can trade at a discount to the Net Asset Value (NAV).  Performance charges may apply.

VCT shares may not be easy to sell at full value. Trading in VCT shares is not particularly active, so shares tend to be valued at a discount to their net asset value.

Who manage the VCTs?

The VCTs promoted by F&C are run by Bluehone Investors LLP of the industry’s leading VCT managers.  Find out more: