Are Venture Capital Trusts Set for a Record 2019?

VCTs are trying to raise £850 million in funding this year but rule changes are pushing the sector towards higher risk businesses and that could hit returns

Cherry Reynard 4 February, 2019 | 1:46PM

Fund managers with targets

Venture Capital Trusts (VCTs) are seeking a record £850 million of funding this year, with 15 open offers, six already closed and another three due to be launched. This is ahead of last year’s record fund raising of £728 million. It comes at a time when rule changes are pushing the sector towards smaller, higher risk businesses. Is there a danger of too much money chasing too few deals and this having a knock-on impact on long-term performance?

VCTs invest in earlier stage businesses. To encourage this, the government has put attractive tax incentives in place. For those investing in a new issue, there is income tax relief of 30% up to £200,000. This is given as a tax credit against total income tax liability, though the shares need to be held for at least five years to keep the relief. Any dividends from the VCTs are paid out tax free and there are no capital gains tax to pay either.

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About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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