The various Venture Capital Schemes available in the UK are designed to encourage investment in start-ups...
What are Venture Capital Trusts (VCTs)?
However, the two schemes differ in that an EIS investment is made straight to the company and a Venture Capital Trust investment is like investing in an investment trust with a high-risk profile.
The Venture capital trust 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.
The VCT rules are approved under the European Union (EU) State Aid rules. That means the use of the scheme is permitted by the EU to help drive economic growth in the UK. As the UK enters its foray into Brexit, it remains to be seen if any changes will be made to the scheme.
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