VCT income tax relief soars

VCT investors claimed on £377.5m of income tax relief In 2012-13, a 23 per cent increase on the previous year. 

Half of investors claimed on less than £10,000 each while just 5 per cent claimed more than £100,000, according to figures released by HM Revenue & Customs.

The largest segments of investors – both 21 per cent of the total – put in either £50,000 to £75,000 or between £150,000 and £200,000, the figures show.

Tax relief claimed by VCT investors as a percentage of total VCT assets is growing as well, to 13.5 per cent in 2012-13. The total claimed for the 30 per cent income tax relief was £377.5m. In 2011-12, the percentage was 11.6 per cent, while the total claimed on was £306.9m. 

Richard Troue says the figures make “interesting reading”.

“I don’t think it’s surprising to see the amount invested in VCTs and the amount of people investing in VCTs increasing.

”Quite a few VCTs have performed well over the past few years and this is always likely to attract investor attention,” he says.

A “core” of veteran VCT managers have garnered solid long-term records and the tax-free dividends have been a boon in the low-interest rate world, he adds.

“As and when interest rates rise the popularity of VCTs could wane somewhat, but I don’t see rates rising until the end of next year at least and they’re likely to peak below historic highs,” he explains.

“VCTs should remain attractive against this backdrop. Restrictions on the amount that can be contributed to pensions and a general desire to save tax are also likely to have boosted investor interest. This is a trend likely to continue in my view.”

Triple Point managing partner Claire Ainsworth says the statistics show interest among investors keeps growing.

“The statistics show that investor interest in venture capital trusts continues to increase.

“Investors continue to rely on VCTs as a way to achieve returns but also to benefit from the income tax relief available from investing in small businesses.”

Total VCT assets at 30 April were £3.16bn, up from £2.8bn a year earlier. The figure was £2.64bn in April 2012.