Hargreave Hale VCT offer – 2015/16 and 2016/17 Tax Year

In recent years Venture Capital Trusts (VCTs) have enjoyed a resurgence in popularity. With low interest rates, yield compression and HMRC putting restrictions on the amount some investors can save into their pensions, VCTs can provide another way for long-term investors to access generous tax breaks.

Hargreave Hale AIM VCTs
Hargreave Hale VCTs 1&2 were established in August 2004 and September 2006 respectively and are co-managed by Giles Hargreave and Oliver Bedford. Giles is the very well known and highly regarded fund manager of Marlborough Special Situations, which has given investors over 2,000% in returns. (Source: Hargreave Hale Ltd, 31 October 2015.)

The objective of these VCTs is to invest into smaller, predominantly UK AIM (Alternative Investment Market) companies, which are at an earlier stage of development and have a high potential for strong earnings growth in the future. Investing into smaller companies  comes with a higher risk level than other investments, and so these VCT portfolios contain a broad range of holdings in many different sectors in an attempt to mitigate risk. Furthermore, the fund managers aim to ensure that no single holding exceeds 5% of the total net assets held by each individual VCT, in an attempt to lower single-company risk.

Both VCTs have seen strong returns for investors over the years. The table below shows the previous 5-year rolling returns compared with the FTSE AIM All-Share:

5 Year Rolling Returns 1 Year 2 Years 3 Years 4 Years 5 Years
Hargreave Hale AIM VCT 1* 5.7% 12.0% 42.9% 50.1% 44.0%
Hargreave Hale AIM VCT 2* 4.1% 13.5% 32.8% 37.2% 31.6%
FTSE AIM All-Share** 2.5% -8.7% 5.8% 1.5% -9.4%
*Returns Based on unaudited NAV as at 31st October, excluding income tax relief. **Source: Hargreave Hale Ltd

Why invest into VCTs?

  • 30% income tax relief on the amount subscribed, provided the VCT shares are held for at least 5 years.
  • Tax-free dividends
  • Capital gains tax exemption

Please note that tax reliefs are subject to change and withdrawal (in the event of a breach of the VCT rules). The value of the tax reliefs will also depend on personal circumstances.

  • Both VCTs pay a semi-annual dividend and aim to pay investors a tax free dividend yield of 5% per annum (not guaranteed).
  • The minimum investment is £5,000 which can be split between VCT 1 & 2.
  • Applications for the 2015/16 tax year must be received by 4th April 2016, and for the 2016/17 tax year by 15th November 2016. These dates will be brought forward if the VCTs reach their capacity before this time, which is £15m and £10m respectively.

VCTs and the Risks
VCTs carry a higher risk than many other forms of investment. In addition, the value of an investment in a VCT may go down as well as up and investors may not get back the full amount invested, even after taking into account the tax reliefs. Furthermore, VCTs usually trade at a discount to their net asset value. Please note that it may be difficult to exit the investment and VCTs should be considered long-term investments.

How to invest
Please read the prospectuses carefully, particularly pages 4 and 5 which detail the Risk Factors and decide whether this investment is suitable for you.

Chelsea Discount
Chelsea is offering a 1.75% discount up until 29th January and a 1% discount thereafter. To ensure you receive the enhanced terms please send all applications in the pre-paid envelope provided.

If you require further information on these or any other VCTs, please telephone us on 020 7384 7300 or visit our website at www.chelseafs.co.uk

Important Notice
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. 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.