Venture Capital Trusts

Who could benefit from VCT investing?

An individual who:

• Has a medium to long-term investment horizon and accepts the increased risk profile
• Wants to reduce their income tax liability
• Would like to withdraw excess cash held in their business, tax efficiently
• Is an investment bond holder who wants to exit, but is worried about facing a tax charge on encashment 
• May be restricted on their annual pension contributions, but wants to continue to plan for retirement
• Is a non-domiciled individual wishing to remit overseas income and gains to the UK, tax-efficiently
• Is a landlord interested in offsetting tax on rental income
• Is already retired but may want to extract capital from their pension in a tax efficient manner
• Would like some exposure / diversification to venture capital investments in their portfolio
• Would like to generate a potential supplementary tax-efficient income stream

The risks

• Tax rules are subject to change and tax treatment is dependent on investors' individual circumstances
• If you sell your shares early you will lose the income tax relief. Any upfront income tax relief received will need to be repaid to HMRC
• Tax reliefs are dependent on the VCT maintaining qualifying status. If a VCT loses qualifying status, tax advantages are withdrawn at that point
• VCTs invest in small unquoted companies which is inherently risky; these companies may not perform as hoped and in some circumstances may fail completely
• Capital is at risk and you many lose all the money invested. The value of shares and any income from them may go down as well as up
• VCTs should be considered longer term investments and may be more difficult to realise than other securities listed on the London Stock Exchange
• The secondary market for shares in VCTs is limited and as a result the shares usually trade at a discount to net asset value

What are share buybacks?

VCTs are considered long term investments. Once the minimum five-year holding period has expired, there should be no tax penalties for those investors who may wish to sell down from an existing VCT to realise capital. Share buy backs allow existing VCT shareholders to sell their shares back to the VCT at a small discount¹ to their value, known as Net Asset Value (NAV). The NAV is the combined value of all the assets owned by the VCT after deducting the value of its liabilities. This share buyback process is often a way for investors to refresh their VCT portfolio, and also invest again into another VCT to benefit from further tax allowances.

¹ Approximately 5%, and subject to the buyback policy of the VCT

When can I participate in a share buyback?

Share buyback windows generally only become available in the market on a periodic basis, and as dictated by the board of the VCT when there is sufficient liquidity. Shares in Foresight VCTs are traded on the London Stock Exchange, so any stockbroker can help with a sale, however, the sale process has historically been complicated, particularly for shareholders with physical share certificates.

How do I access the share buyback scheme?

In order to help with this process, Foresight have partnered with Redmayne Bentley who will be able to assist Foresight VCT shareholders. Click the button below to be redirected to Redmayne Bentley’s website for more information.

Foresight cannot provide investment advice and as a result cannot assess the suitability of any transaction you make. We recommend Shareholders seek advice from a regulated financial adviser.