VCTs enjoy strongest fundraising year in over a decade

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VCTs have raised £542m in the latest tax year, up 18 per cent from 2015/16 and the highest amount raised since 2004/5.

The figures take VCT assets under management to £3.9bn compared to £3.6bn last year, when £458m was raised over the tax year. 

It represents the second largest amount ever raised.

Ian Sayers, chief executive of the Association of Investment Companies attributes this year’s inflows into the tax advantageous products to pensions restrictions and attractions of a tax-free yield and the ability of managers to adapt to the new investment rules, as well as ongoing domestic demand.

The highest amount raised was £779m when income tax relief was increased from 20 per cent to 40 per cent.

Sayers adds that this year’s total raise it good news for UK smaller companies seeking to access finance and expertise.

“VCTs have an excellent track record of providing scale-up capital to smaller companies, creating growth, jobs and innovation,” Sayers says.

“The growth of smaller companies is vital for the UK’s economic success and some of the businesses VCTs support develop into household names.”

While most VCT inflows happen in the last six weeks of the tax year, a number of funds had closed their offers at the start of February due to investor demand.

The pensions lifetime allowance reduced from £1.25m to £1m this year, while a new tapered annual pensions allowance for those with earnings above £150,000 has been introduced. This leaves many investors with little choice but to opt for EIS, SEIS or VCT if they want a tax efficient investment.

At the same time, many VCT managers have built up cash as new Government legislation meant they held back on new deals as they got to grips with the changes and sought guidance from HMRC.

VCT fundraising figures

Tax year

Fundraising (£millions)

2016/2017

542

2015/2016

458

2014/2015

429

2013/2014

420

2012/2013

269

2011/2012

267

2010/2011

354

2009/2010

338

2008/2009

154

2007/2008

219

2006/2007

267

2005/2006

779

2004/2005

505

2003/2004

50

2002/2003

65

2001/2002

125

2000/2001

433

1999/2000

270

1998/1999

165

1997/1998

190

1996/1997

170

1995/1996

160