Analysis of the 2021/22 VCT Tax Season
- On July 12, 2022
- By Chris Gosling
In our last update on the 2021/22 VCT season we commented on both the potential for the season to be record breaking both in terms of investment raised and the speed at which it was being done. Whilst the final count is not yet officially in, VCTs look to have raised north of £1bn in the tax year 2021/22 and this is the first year such a figure has been achieved. The previous highest raise was in 2005/06 when £780m was raised, though this coincided with the tax relief being raised from 20% to 40%. Since the tax relief settled at 30% following this, the VCT flows saw a low of £150m in 2008/09 and a high of £716m in 2018/19. In the tax year 2020/21 £668m was raised. Year on year we’re seeing an increase in investment of over 150% into VCTs, but what is more interesting is the speed that the fundraising was done. See below for some examples, but across the market as a whole saw new raises fill in around half the time, despite the raise amounts being higher. The Octopus Titan VCT, the largest VCT in the market, raised an eye watering £200m in just 28 days, over £7m a day on average. The VCT also returned an annual total return of 20.3%. The previous year it raised £120m in 133 days. Albion VCTs were second behind Octopus Titan in terms or funds raised of £96.5m and Baronsmead third with a total of £75m.
|Fund manager||Fund||2020/21 raise (£m)||2020/21 days||2021/22 raise (£m)||2021/22 days|
|Draper Esprit||Draper Esprit VCT||20||35||30||27|
|Hargreave Hale||AIM VCT||30||166||40||50|
Appetite for AIM VCTs continued to be strong in the last tax year despite the AIM market turning in a strong performance since the Covid pandemic hit. Drilling down into the AIM VCTS the total raised in 2021/22 was up 135% on the previous tax year and the combined days to fill each of the AIM raises was roughly a third of the previous year. Amati raise the most for a pure AIM VCT, raising £65m in two tranches over the tax year taking a total of 13 days to fill
Can I be in your club
With many VCTs offering discounts to existing shareholders and/or priority access to new raises getting “in” has never been more important but once you’re in you can reap the benefits offered to “members”. 2021/22 saw a great example when Mobeus’ four VCTs returned to the market after not raising in 2020/21 and they managed to raise £35m in one day with the bulk of this going to existing shareholders. GrowthInvest managed to get all of our new investors that applied through the platform into the VCTs with all investors receiving a full allotment in Mobeus, demonstrating the power of an automated execution process offered by the platform.
Octopus launched their first new VCT for some time when they launched the Future Generations VCT in Q1 of 2022. The VCT invests in business that are helping to build a sustainable planet, empower people, or revitalise healthcare. It is unlikely the VCT will be able to pay a dividend before July 2025 though this didn’t stop the new VCT raising over £20m before the end of the tax year.
Can the raise go even higher…..
It will be interesting to see if the 2022/23 tax year delivers on the strong growth seen in the previous tax year. The recent VCT investment flows have shrugged off the economic impacts from Brexit and the Covid pandemic, but with inflation rising sharply and the cost of living hitting people directly in their wallets and purses, coupled with the massive uncertainty created by Russia’s invasion of its neighbour Ukraine, it is difficult to see how the trend can continue. Never say never though, these are long term investment instruments and the recent VCT investment flows have shrugged of the economic impacts from Brexit and the Covid pandemic.
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