Early indications that a quarter of inflows to the Titan VCT will come from Isa investors has been described as “surprisingly high”.
Octopus Investments became the first provider of the tax advantageous products to open up to Isa investors last month.
An Octopus spokeswoman says they are expecting 25 per cent of Titan inflows to come from Isa transfers.
Tilney managing director Jason Hollands says that is “surprisingly high” and is skeptical about using Isas to invest in VCTs given dividends and capital gains are already tax free.
“VCTs are a type of investment that might typically be considered as an additional form of tax-free investment by someone already maximising core allowances such as pensions and Isas,” says Hollands.
“The only people who might consider this are investors with large Isa portfolios who want to make a small allocation to VCTs but have no new cash to invest.”
Octopus managing director Paul Latham confirms investors won’t be getting any additional tax reliefs. “You would get the same tax reliefs if you invested in a VCT from money held outside your ISA.”
Latham says: “We’re just enabling people to access the planning benefits of a VCT and the growth potential of some of the UK’s most exciting growth companies through their Isa funds. For many people this is the only pot of money they have available to invest.”
All VCT investors benefit from tax-free income and capital gains. Additionally, shares bought when the VCT launches or raises new money can get 30 per cent tax relief on investments up to £200,000.
Investments made via Isas are tax-free up to £20,000.