Venture Capital Trusts

The Venture Capital Trusts (VCT) scheme has been designed to encourage individuals to invest in small, generally high risk trading companies. The VCT scheme is similar to the Enterprise Investment Scheme (EIS) which also offers tax breaks for investors. Both of these schemes are designed to encourage private individuals to invest in smaller usually high risk companies.

The VCT scheme offers investor’s Income Tax relief of 30% on new subscriptions for ordinary shares in VCTs. The maximum amount qualifying for relief is £200,000 in each tax year. Dividends received from VCTs are exempt from Income Tax, provided the shares acquired (by subscription or purchase) are within the annual limit of £200,000 and held for 5 years. Shares in VCTs acquired within the annual limit are also exempt from CGT on disposal at any time, but losses on disposal are not allowable as capital losses. 

New statistics on the use of the scheme in 2022-23 have been published. The headline points are as follows:

• VCTs issued shares to the value of £1,001 million in 2022-23, which is 10% lower in comparison to the 2021-22 figure of £1,112 million.
• The number of VCTs raising funds has decreased by 1 to 44 in the tax year 2022-23.
• The number of VCTs managing funds has decreased by 4 to 48 in the tax year 2022-23.
• In 2022-23, Venture Capital Trust (VCT) investors claimed Income Tax (IT) relief on £985 million of investment. This is a decrease of 6% from 2021-22.
• The number of VCT investors who claimed Income Tax relief has broadly remained consistent increasing by just 1% to 26,260 in 2022-23.