Within the limits

vcts

VCTs have to meet a number of strict conditions to maintain their status but managers who understand the current economic environment and match fund raising to projected deal flow should have no difficulty complying

VCTs have come under close scrutiny by HM Revenue & Customs (HMRC) in recent months. The HMRC has warned VCT managers that it will no longer tolerate breaches of its rules. With that in mind we have taken a look at the reasoning behind their warnings. VCTs were devised in the 1993 Budget and launched in the autumn of 1995. Now 10 years on VCTs have evolved, as have the tax reliefs and the guidelines that rule them. Increases in the initial income tax relief from 20% to 40% sparked a bumper fund raising year in 2004/05 when over £500m was raised, compared to only £56m in the previous tax ye...