As the tax year-end approaches, Vince Keen, Blackfinch, highlights the reasons why he believes that advisers should consider the benefits of newer VCTs as part of the due diligence process

Established tax planning tool

2020 was a silver anniversary for Venture Capital Trusts (VCTs). It is over 25 years since the UK Government launched these tax-efficient vehicles to encourage support for new and growing firms. To offset investment risk, VCTs offer 30% Income Tax relief (minimum holding period five years); gains exempt from Capital Gains Tax on sales of shares; and no Income Tax on any dividends.

Over the years, they’ve become popular with investors, reflected in fundraising amounts. In the tax year 2019/20, VCTs raised £619 million. While, due to the impact of the coronavirus pandemic, this was lower than in 2018/19, it reflects the continued appetite for VCTs. (Source: The Association of Investment Companies, 2020). With tax mitigation always high on the agenda, VCTs continue to feature in client portfolios.

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