Third-generationVCTs hold on to their value

Despite the lower income tax relief on VCTs, these are still attractive investment vehicles and are a good complement or alternative to pensions

VCTs are now in their third incarnation and different products to what they were in 1996, as table 1 shows. The crucial difference is the change in the tax incentive from capital gains tax deferral to income tax - both in terms of the upfront tax relief and the tax-free dividend. Despite the rule changes, and a reduction in income tax relief and the size of companies that can be held by a VCT, the tax advantages are still very attractive and unique. The Treasury has indicated that VCTs will be around for the next few years, which means that they are still attractive investments and can fo...