VCT season starts early amidst rumours of income tax relief cuts

Rumours are circulating that the government will cut the initial income tax relief available on Venture Capital Trusts (VCTs) from 30% to 20% in its November Budget.

As a result, VCTs are opening their top-up offers early this year so that investors can make use of the more favourable tax benefits while they are still available. Five offers are already open and a further 10 are expected to open shortly.

Invest early to avoid disappointment

We fully expect popular VCTs to receive their desired amount of investment quickly and close before their offer periods officially end.

Because of this, we are offering for our clients the chance to sign-up to a mailing list and receive details of offer documents as soon as they become available.

Downing FOUR (Healthcare), Elderstreet, Foresight, Octopus AIM and Unicorn AIM are open already. You can find all the details of these VCTs, along with the application forms and brochures (which must be read before an investment can be made) on our website.

Albion, Amati, Baronsmead, Calculus, Maven, Mobeus, Northern, Octopus TITAN, Pembroke, and ProVen are the VCTs expected to open soon.

A reminder of the current tax advantages

VCTs invest in UK smaller companies and come with a variety of tax advantages to the investor. These include:

• 30% income tax relief when purchasing into new VCT fund raisings*
• No capital gains tax to be paid upon sale of VCT shares
• No income tax to be paid on dividends paid from VCTs.

*As long as the investor has paid relevant income tax. These shares must be held for at least five years, or this 30% must be paid back.

The downside of VCTs

VCTs invest into very high-risk, smaller companies which may fail. They are also very illiquid and you may have to hold them for longer than the minimum five-year investment period. There is a risk that you will get back less than your original investment.

IMPORTANT NOTICE: VCTs

Please be aware that VCTs are long-term investments. VCTs usually invest in small, unquoted companies and therefore carry a greater risk than many other forms of investment. They are also very illiquid and you may have to hold them for longer than the minimum five-year investment period. In addition, the level of charges are often greater than unit trusts and OEICs. Past performance is not necessarily a guide to the future. The value of investments, and the income from them, can fall as well as rise, due to market and currency fluctuations and you may not get back the amount originally invested. All our featured products should be regarded as medium to long-term investments. Chelsea Financial Services offers an execution-only service. If you require investment advice you should contact an expert adviser. Tax assumptions are subject to statutory change and the value of tax relief (if any) will depend upon your individual circumstances.