Why VCTs are rich in opportunity

By Lora Benson | Sep 17, 2018
With fundraising reaching a decade high last tax year, VCTs are delivering a myriad of benefits for investors and investees alike. Puma Investments explains why they’re so attractive.

Before the Budget announcement, many were concerned the attractive tax reliefs for Venture Capital Trust (VCT) investors would be curtailed. Instead, they were enhanced: investors continued to receive a 30% upfront tax break, tax-free capital gains and tax-free dividends, while VCT managers were given double the time to reinvest or distribute the proceeds of an exit.

This outcome suggests we may be entering a period of stability; a sentiment strengthened by the record investment in VCTs last tax year, when fundraising reached £728 million – the highest level in more than a decade[1]. The upshot is twofold: last year’s investors will receive more VCT-related income tax relief than in any year since 2006[2], while numerous SME businesses will benefit from crucial VCT investment, offsetting their ineligibility for capital from traditional sources.

At Puma Investments, our experienced investment team works with SME entrepreneurs to unlock the potential in their businesses. We select diverse, revenue-generating companies with significant growth opportunities, experienced management teams and robust business plans.

The benefits of investing in VCTs

The advantages of investing in VCTs apply to a range of different investors. High earners can claim up to 30% income tax relief on VCT investments of up to £200,000 a year. Furthermore, unlike pension contributions, VCT income tax relief can be offset against any income tax, including earnings from property, which means landlords can benefit from tax relief on rental income.

In light of the annual and lifetime limits attached to pensions, VCTs also offer an alternative way to invest tax-efficiently. For instance, VCT income tax relief can be used to reduce the tax paid on pension income for those facing income tax liability on pension drawdowns.

In addition, dividends from VCTs can provide a regular tax-free source of income. Since 2005, we’re pleased to have raised more than £230 million across our VCTs and, more importantly, paid more than £130 million in dividends to investors.

Puma VCT 13 – open for investment

Currently, Puma VCT 13, which is our latest limited-life VCT, is raising an additional amount of £5 million – and those who invest before 1 October will receive an enhancement of 1% in additional shares. With limited opportunity for new subscriptions, we encourage investors to apply early to avoid missing out.

The VCT targets average tax-free dividends of 5p per year from 2020, has a limited new capacity of £5 million and is managed by Puma Investments – an award-winning investment manager with a 20-year track record. It’s the only limited-life VCT on the market and, in contrast to evergreen funds, investors commit capital for a defined period of time.

To discuss Puma VCT 13 with our team, contact us on 0207 408 4070 or visit our dedicated VCT web page here. To read more about the benefits of VCT investing, visit here.

This communication is a financial promotion issued by Puma Investments in accordance with section 21 of the Financial Services and Markets Act 2000. Puma Investments is a trading name of Puma Investments Management Limited which is authorised and regulated by the FCA (FRN 590919). An investment in the service carries risk and may not be suitable for all investors. Investors should refer to the Investment Details and Client Agreement, copies of which are available on pumainvestments.co.uk. Key risks of the service include: Past performance is not a guarantee of future performance; you may lose money; tax reliefs are not guaranteed; long-term and potentially illiquid investment.

[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/665516/171206_Commentary_VCT__8_9.pdf

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/665516/171206_Commentary_VCT__8_9.pdf

Puma Investments

About Puma Investments 

Puma Investments offers a range of tax-efficient investments with a proven track-record of delivering for our investors and the businesses we support.

We are proud to be part of Shore Capital, a wider financial services group with a 30+ year track record of excellence, a strong balance sheet and a 160 strong multi-disciplinary team across five offices.

To date we have raised over £357 million since 2005 and, more importantly, over £113 million has been paid in dividends to shareholders. We focus on 3 core activities: Growth Capital for UK SMEs, Property Finance and Listed Equities.

Please refer to our website at www.pumainvestments.co.uk or call 020 7408 4070 if you are interested in any of our investment opportunities.

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