VCTs: Investment trusts with tax breaks?

In the first of a series of articles on VCTs, Jack Rose, business development director for tax products at LGBR Capital, explores how VCTs work and what they can offer different types of investors

The UK government established venture capital trusts (VCTs) almost 20 years ago to encourage investment into smaller UK businesses. The generous tax benefits offered compensate for the increased risk associated with investing in smaller, less liquid companies. Since their introduction in 1995 to the end of the 2013/14 tax year, VCTs have raised over £5.4bn according to the AIC, providing important support and funding to the UK's SME sector. Research from the AIC also suggests historical performance has been strong. The average total return for a VCT investment of £100 to 31 December 2...