Flood of VCT launches comes to the market

Generous tax breaks are making VCTs look an attractive proposition but a rush of money could overheat the sector

A flood of venture capital trust (VCT) launches has accompanied the introduction of attractive tax breaks for these vehicles. Under the amended rules, VCT investors can receive a 40% income tax rebate, even if they are a basic rate taxpayer, up to a maximum of £200,000 per tax year. The rebate is issued as a deduction from their income tax bill and the investor must keep the shares for three years to maintain the tax advantages. Essentially, the tax breaks mean even if the VCT's performance stays flat over three years, this would equate to a compound tax-free return of 18% per year. A...