Venture Capital Trust - Tax Reliefs

Tax Reliefs

Tax reliefs are different for investors in new shares issued by VCTs and investors who purchase second-hand shares, for example on the stock market.

For second-hand shares, the reliefs are

• exemption from income tax on dividends on ordinary shares in VCTs
• exemption from capital gains tax on disposal of shares in VCTs

For new shares, the same reliefs are available, and in addition

• income tax relief at the rate of 30% on the amount subscribed for the shares (on or after 6 April 2006). This relief is available on investments up to £200,000 in a tax year (£100,000 before 6 April 2006), if they are held for at least 5 years (3 years for shares issued before 6 April 2006).
• for shares issued before 6 April 2004, capital gains tax deferral (that is, tax on the gains on the disposal of other assets within 12 months before or after the investment could be postponed until the VCT shares were disposed of)

Compared with the issue price of new shares in VCTs, the price of VCT shares on the stock market (second-hand shares) tends to be lower, reflecting the absence of income tax relief.