GuideVenture Capital Trusts
VCT frequently asked questions
Investing in Venture Capital Trusts (VCTs) can offer unique opportunities for growth and tax efficiency, but understanding the details is essential.
Our VCT FAQs guide is here to simplify the process, offering clear answers to common questions about how VCTs work, the benefits they offer, and what to consider before investing.
Explore the insights and expert guidance you need to make informed decisions with confidence.
What is the six month rule for VCT?
Income tax relief cannot be claimed where a VCT buys back shares from an investor, and that investor subscribes for new shares in the same VCT within six months.
Is there a minimum holding period to retain the tax benefits of a VCT?
Investors must hold shares for five years to retain any income tax relief claimed. There is no minimum holding period for VCT capital gains tax and dividend tax relief. Provided investors invest £200k per tax year, CGT and dividend relief should be available on the shares purchased.
Are VCTs free of inheritance tax?
No, they are included in the estate for IHT purposes.
How to invest in a VCT?
VCTs are listed companies, so you can buy shares on the secondary market via an investment platform or stockbroker. However, shares purchased on the secondary market do not qualify for the upfront 30% income tax relief. Upfront income tax relief is only available on newly issued shares, therefore most investors choose to buy new shares in a VCT fundraise.
You can apply to buy shares through a financial adviser (recommended), directly with Octopus or via an intermediary such as Wealth Club. Our VCTs are also available through some investment platforms such as Hargreaves Lansdown and Crowdcube.
We always recommend investors seek financial advice before investing.
How much do VCTs charge?
Fees and charges depend on the VCT. Fees for Octopus VCTs can be found on corresponding product webpages/brochures.
Are VCT dividends taxable?
VCT dividends are tax free and investors are not required to report them on their tax returns.
What is the minimum and maximum investment in a VCT?
Minimum investment depends on the VCT and varies. There is typically no maximum investment. But an investor can only claim tax relief on the first £200,000 invested in a tax year (i.e. £60,000 in tax relief).
Do VCTs have to be approved by HMRC?
Yes, VCTs are broadly similar to an investment trust, only it has been approved by HMRC to invest in smaller unquoted companies and thereby shareholders can enjoy certain tax reliefs.
Do I need to have a financial adviser to invest in a VCT?
No. But we always recommend seeking advice before investing. Investing in smaller companies is high risk and not suitable for everybody. Tax treatment also depends on personal circumstances and may change in the future.
Can I carry forward unused tax relief from a VCT investment?
No, this is not possible.
Can I reinvest my VCT dividends?
Yes. Some VCTs have reinvestment schemes which allow you to invest dividends to buy more shares in the VCT. These newly bought shares also also attract 30% income tax relief.
What happens to my VCT investment if I pass away?
Your estate will not have to repay any upfront income tax relief already claimed if you die within five years of holding the investment. If the value of the VCT shares on death is less than £200,000, the dividends paid by your VCT will still be tax free, and there will be no capital gains tax to pay on the growth of the investment when your beneficiaries choose to sell it.