Buying and selling Venture Capital Trusts
With investment, your capital is at risk.
Venture Capital Trusts (VCTs) are considered to be specialist, high-risk investments as they invest in small companies with shares that are illiquid and can be hard to sell. As you must remain invested for at least five years to keep the tax credit, VCT shares are also long-term investments. Because of this, they should only form a small part of your overall investment portfolio. Please see the Important Information and Further Details below for further information.
Most VCT share offers are from existing VCTs seeking additional funding through a top-up offer, but occasionally an entirely new VCT will launch. Offers are accompanied by either a Securities Note (for top-up offers) or a Prospectus (for new launches).
These documents contain important information about the offer, details of the risks involved and the application forms. It is important to read them carefully before investing. You can download documents for all current VCT offers from the current VCT launches page.
There is an offline process for applying for VCTs through Bestinvest. You should return your completed and signed application to:
This should be accompanied by a cheque made payable to the relevant VCT (as stated on the application form) rather than Bestinvest. Alternatively, most VCTs now accept payment by electronic bank transfer providing an application form is also posted. As each VCT offer only has limited capacity, we suggest that you contact us to check that it remains open before submitting your application.
Once we have received your VCT application we will process it and send it to the receiving agent of the VCT manager. You will receive written confirmation from us, followed by confirmation from the VCT’s receiving agent. A few weeks later you will be sent both a share certificate and an Income Tax relief certificate. These should be kept in a safe place.
When you complete your tax return there will be a section for you to disclose any VCT investments made during the year. You will then receive your 30% VCT Income Tax credit either by way of a change in your tax code or as a lump sum from HM Revenue & Customs. If you are self-employed the tax rebate may be paid by a reduction in Schedule D tax.
It’s important to remember that if you sell VCT shares within five years of buying a new share issue you will need to pay back the 30% income tax credit.
Although VCT shares are listed on the stock market, the secondary market is little traded and shares always trade at discounts to their net asset value. The good news is that most VCTs now have buyback schemes in place to limit the level of discount for investors wanting to sell. In many cases this is 10% but an increasing number of VCTs now target a discount of 5%.
If you are looking to sell VCT shares we strongly suggest you do not use an automated online service such as the Online Investment Service. Instead, you could contact us and we would be happy to arrange with market makers for your shares to be purchased through a VCT share buyback. Call us on 020 7189 9999 or request a call back if you want to know more about selling VCT shares.
Speak to our experts today for more information about VCT investments.
VCTs should be regarded as higher risk investments. VCTs are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. Historical or current yields should not be considered a reliable indicator of future returns, which cannot be guaranteed. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Owing to the nature of their underlying assets, VCTs are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change, and the availability of tax reliefs will depend on individual circumstances. You should only subscribe for new VCT shares on the basis of the relevant prospectus and must carefully consider the risk warnings contained in that prospectus.