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Choose your subscription. VCT funds will be used to finance small and medium sized businesses with a relatively high risk profile. Such risks are mitigated by creating a portfolio of such investments. Some of the underlying investments will inevitably fail, some will perform adequately but the principal objective of a VCT fund manager is to make a number of investments which will produce excellent returns for shareholders, more than compensating for losses.
Investors should regard an investment into VCTs as a long-term investment, particularly as VCT shares need to be held for a minimum period of five years to retain the initial income tax relief. The levels and basis of VCT tax reliefs available to investors may change or be withdrawn at a future date. VCT status is only maintained if a VCT satisfies a number of continuing tests and there can be no guarantee that this can be achieved at all times.
In particular, a VCT must satisfy a requirement that, by the end of a period of three years from raising capital, its investments in qualifying companies represent at least 70 per cent of its total investments. A loss of VCT qualifying status within five years would result in investors having to repay tax reliefs obtained. Realisation of unquoted company investments may be difficult and take considerable time. Constraints may be imposed on the realisation of investments in order to maintain the qualifying status of a VCT which may restrict its ability to obtain maximum value from its investments.
As the portfolio matures and the successful investments increase in value, the Net Asset Value should increase enabling dividends to be paid to shareholders. Private investors should always seek advice from an independent financial adviser 'IFA' when considering investing in a VCT. The FCA expects IFAs to provide their clients with sufficient information to explain the particular risks of VCTs and ensure a balanced view of investing in such funds.
Higher rate taxpayers prepared to allocate a proportion of their investment portfolios to higher risk investments. Investors prepared to accept a higher than average risk than other collective investments, for potentially higher post tax returns.
Individuals who have used up their annual ISA allowances or are investing the maximum allowed in their pension plans. Investors should only invest in a VCT if they understand the nature and risks inherent in such an investment and, if appropriate, have sought professional advice. Depending on your personal attitude and approach to risk and reward, you may decide to subscribe to one or more VCT in any one tax year. Generalist VCTs may offer more regular returns through dividends at lower risk whereas Specialist VCTs may offer potentially higher returns but at higher risk.
During this three year period, the uninvested cash is normally held on deposit or in money market funds. A VCT may also utilise this cash reserve to offer to buy back shares in the market.
Investors should consider VCTs as a long term, tax free dividend yielding investment. 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.
If you would like one of our investment professionals to call you, please fill out your details and one of our team will be in touch. Please use this form to get in touch with our experts if you have any questions or would like more information. What are the risks of VCTs? How to invest in VCTs. What is a VCT? Investing in these funds may result in significant losses. VCTs invest in different types of companies across various industries for fixed periods of time.
Evergreen VCTs invest indefinitely whereas certain short-term venture capital trusts called limited-life VCTs are only designed to bring income for a few years. There are also generalist VCTs, which are trusts that diversify across multiple sectors and industries, and specialist VCTs, which focus on one sector at a time.
Investors with a particular interest or background in technology can choose to hedge their bets on a specialist technology-focused VCT. The fund is invested in more than 90 tech-enabled companies with strong growth potential that are in the development stage, including:. These companies comprise a variety of sectors. The firm aims for dividends of around five pence per year. Additional dividends may also be allocated if businesses within the portfolio are sold at a high profit.
The fund returned Octopus Investments. Business Leaders. International Markets. Mutual Fund Essentials. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile.
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